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Solution17. Armen lives in Washington State, where grapes are grown. Armen’s twin Allen lives in New York, where grapes must be trucked in from Washington at a fixed cost of $0.20 per pound of grapes. Armen and Allen have identical tastes, but Armen tends to purchase lower-quality grapes and Allen tends to purchase higher quality grapes. Use indifference curve analysis to explain this oddity.18. Mitch cares only about how much he can write. Because a pen will write 7 miles of text and a pencil will write 35 miles of text, Mitch considers them perfect 5-to-1 substitutes. If the price of pens is given by Ppenand the price of pencils is given by P pencil, and if Mitch’s income is given by Y, use indifference curve analysis to derivethe demand curve for pencils.))Quantity of pencilsPrice($/pencil)5PpenY/PpencilGoolsbee1e_Solutions_Manual_Ch05.indd 57Goolsbee1e_Solutions_Manual_Ch05.indd 5711/15/12 3:08 PM11/15/12 3:08 PM
58Part 2 Consumption and ProductionSolutionSolution