# midterm1answers - 1. (5 points) Jorge’s Total Willingness...

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Unformatted text preview: 1. (5 points) Jorge’s Total Willingness to Pay Schedule for hate is AAWP \$50 for 1 hat 5'0 \$50 for 2 hats 0 \$50 for 3 hats a \$50 for 4 hats 0 \$50 for 5 hats 0 If the price of a hat is \$10, how many hats will Jorge buy? Mowgmml ﬁes—t L\$IO~ Y mwp: 0350 W let/WV 0 {ﬂy lno‘ krp Ma Orr "Hi, 2'10! M+ > WgIMI it? He wru bud / Lash 2. (5 points) Assume that the demand curve for candy bars is D (p) x 250 — p, where p is the price of a candy bar. Candy bars are produced and sold by a. monOpolist with the cost curve C7 = 0, where Q is the quantity of candy bars produced. Solve for the monopolist’s optimal price. a...“ (on! £€V£MAJL = 1705*?) a [WWW Mavgmt Removal 2 350*2F ‘ < T EVJOVZF (9/2. MLAF Marginal do,» = 0 ﬂmawfoﬂange‘ \ *} ~ , 2;) )50 ijO {50 2P:{I:Mf :waFIAf 12> P;)M1 - 3M £1on 3))50~2{>> 3. Jimmy’s total willingness to pay schedule for DVDs is Mwm MWP cw w- 11 for 1 DVD n y 21 for 2 DVDs ‘0 34 (bro ) 30 for 3 DVDS “l I 7 (56’ I» ) 38 for 4 DVDS 45 for 5 DVDs 1 l l 4‘} ‘50” ) 49 for 6 DVDS 8 7 e 4* 49 for 7 DVDs 0 Jimmy can only buy DVDS at MoyieS‘core. a) (1 point) How many DVDS will Jimmy buy if the price of each DVD at MovieStore is \$5? Mﬁrﬂi'ml 0931/ F: 5 13> jmmy WM but! 5 DVDS» b) (2 points) How many DVDs will Jimmy buy if MovieStore only sells DVDs in pairs and the price of each bundle of two DVDS at MovieStore is \$10 ? HQ mm W 5 [pairs (6 W9) 4. (2 point) Will’s total Willingness to pay (TWP) schedule for DVDs is as follows Quantity TWP (\$) /V\ W 1 22 22 2 30 8 3 35 5 4 V 39 4 5 41 l 6 42 ‘ 7 42 a Will can only buy DVDS from VidCOSupeL Suppose now that VideoSuper charges regular customers \$6 for each DVD and that Video~ Super sells DVDs at 50% discount to customers who (choose to become Club Members by paying a \$4 membership fee. Will Will choose to become a Club Member at VideoSuper? lithe :3 mm (A Wiper JUL buds )/ DVDS NW W4”: 30'2xb :'(()Q, 2:} mm! 1‘s a Wmlwr, Ina bulk/ls 4 DVDS Aka/Jr we‘ll“? 1 33—4x5 = 2%. :2 .‘ll wrtl OIVOOLQ/ wk, by, a mmbun, 5. Juan’s preferences satisfy the following indifference relations and strict preference rela- tions: (2 oranges, 1 apple) >— (2 orange, 0 apples) 2 oranges, 0 apples) N (O oranges, 2 apples) O oranges, 2 apples) >— (1 orange, 1 apple) ‘ Wag” LX’f/Lh’lﬂé ( (1 orange, 1 apple) > (1 orange, 0 apples) ( 1 orange, 0 apples) N (O oranges, 1 apple) maﬁa, A/ , (U oranges, 1 apple) > (0 oranges, 0 apples) J uan’s preferences are also transitive, complete and reﬂexive. a) (1 points) In a carefully labeled diagram, depict the indifference curves for Juan that go through the following points: (1 orange, 1 apple) and (U oranges, 2 apples) 1&er r (a 079.59,);ﬁYYW/b) (' r owja, l mu ). 0mth b) (1 points) If the price of an orange is \$4 and the price of an apple is \$4 might Juan ever buy 1 apple and 1 orange? Explain. /\/0. Hz Metal n»va (QM/j a Fair at arij 0L a pal? cw) a CH 6. Frank consumes only juice and milk. An Economist observes prices and Frank’s consmnp— tion choices for 2 months. The Economist collects the following data on Frank’s consumption: l’I’lOIlth Gm 6103 pOJ PCB oct 2 4 1 1 nov 0 6 2 1 a) (1 point) Does Andre’s income change during these two months? Am. Oct: 2ci)+4u>;5 AM]; o())+ éu)>é« b) (1 point) Plot Andre’s budget constraint and optimal choice for each month. (701" (X03 :1 (J'KXcg c) (1 point) Can it be determined whether Andre is better off in October or November? Andra (3 W 6qu m 0%. 86mm L9. chore, (90M A Mom 9 [3 Wevo’iotbmé? I BONUS 1. (1 point) What, if anything, do you (as an economist) expect to happen to the number of accidents when seatbelt use becomes mandatory? Explain (in 1—2 sentences). Acacia mils wnl Maw, \$2M but will {rm/l "15° mm, rubles; ohm/‘7 BONUS 2. a) (0.5 points) What, if anything, do you (as an economist) expect to happen to the number of@ who report having same~sex sexual orientation (or report being in a same—sex relationship or report having same—sex sexual desires) when HIV/ AIDS becomes more prevalent? Explain (in 1-2 sentences). Due ’ﬁo 'f/(Q meant, HLV (3 Wm £06143 ’ﬁmmfﬁrrwl gaffe my. I g MM: M» Ma sample. \$0 77m nwméer w H duom . b) (0.5 points) What, if anything, do you (as an economist) expect to happen to the number of women who report having; sai'ne—sex sexual orientation (or report being in a same—sex rela— tionship or report having same—sex sexual desires) when HIV / AIDS becomes more prevalent? Explain (in 1—2 sentences). How/MM , WOW, Hll/ ,3 (149 will twang/farm! L;me (#hI‘W’lﬁ . 90 ‘Hsz/ I’M/ember wil/ Mom/egg . ...
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## This note was uploaded on 04/07/2010 for the course ECONOMIC 201 taught by Professor Mikko during the Winter '10 term at Waterloo.

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midterm1answers - 1. (5 points) Jorge’s Total Willingness...

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