ps1f06 - Economics 101 Problem Set 1 Alan C Marco Due Wed...

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Economics 101, Problem Set 1 Alan C. Marco Due Wed., 9/20/06 Instructions. Dueatthebeginningoflecture(orbeforehandinmyboxintheeconomicsdepartment). Iencourage you to work in groups of 2 or 3 (NOT 4). Please turn in only one problem set for each group, with the full names of all the students on the front page. Problem sets must be neat, readable, and concise. I prefer typed. They must be stapled if they are more than one page. All answers should be explained. Starred questions are more difficult. 1. Bill’s preferences for goods x and y are given by the following table that lists combinations of goods that make Bill equally well off. Units of x Units of y 16 6 12 8 8 12 4 24 (a) Graph Bill’s indifference curve, with x on the horizontal axis. Assuming that the price of x is $1.00 and the price of y is $1.50, and that Bill has $24 to spend, add a budget line to the graph. (b) What combination of x and y will maximize Bill’s utility?
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