Final grade 100 90 Feasible frontier U Hours of free time per day Show Transcribed Text w G IC₂ 24 IC₂ ∙IC, IC, 1. Explain what indifference curves represent and the meaning of their slope (MRS).

During the Second World War, Germanys factories were decimated. It also suffered many human casualties, both soldiers and civilians. How did the war affect Germanys production possibilities curve?

Praxilla, who lived in ancient Greece, derives utility from reading poems and from eating cucumbers. Praxilla gets 30 units of marginal utility from her first poem 27 units of marginal utility from her second poem 24 units of marginal utility from her third poem, and so on, with marginal utility declining by three units for each additional poem. Praxilla gets six units of marginal utility for each of her next three cucumbers consumed, five units of marginal utility for each of her next three cucumbers consumed, four units of marginal utility for each of the following three cucumbers consumed, and so on, with marginal utility declining by one for every three cucumber consumed. A poem costs three bronze coins hut a cucumber costs only one bronze coin. Praxilla has 18 bronze coins. Sketch Praxillas budget set between poems and cucumbers, placing poems on the vertical axis and cucumbers on the horizontal axis. Start off with the choice of zero poems and 18 cucumbers, and calculate the changes in marginal utility of moving along the budget line to the next choice of one poem and 15 cucumbers. Using this step-by-step process based on marginal utility, create a table and identify Praxillas utility—maximizing choice. Compare the marginal utility of the two goods and the relative prices at the optimal choice to see if the expected relationship holds. Hint: Label the table columns: 1) Choice, 2} Marginal Gain from More Poems, 3) Marginal Loss from Fewer Cucumbers, 4) Overall Gain or Loss, 5) Is the previous choice Optimal? Label the table rows: 1) 0 Poems and 18 Cucumbers, 2) 1 Poem and 15 cucumbers, 3) 2 Poems and 12 cucumbers, 4) 3 Poems and 9 Cucumbers, 5) 4 Poems and 6 cucumbers 6) 5 Poems and 3 Cucumbers, 7) 6 Poems and 0 Cucumbers.

Take Jeremys total utility information in Exercise 6.1, and use the marginal utility approach to confirm the choice of phone minutes and round trips that maximize Jeremys utility.

What are four responses to the claim that people should not behave in the way described in this chapter?

Would a research study on the effects of soft drink consumption on childrens cognitive development he a positive or normative statement?

Suppose Alphonsos town raises the price of bus tickets from 0.50 to 1 and file price of burgers rises from 2 to 4. Why is file opportunity cost of bus tickets unchanged? Suppose Alphonsns weekly spending money increases from 10 to 20. How is his budget constraint affected from all three changes? Explain.

Individuals may not act in the rational, calculating way described by the economic model of decision making, measuring utility and costs at the margin, but can you make a case that they behave approximately that way?

Would an op-ed piece in a newspaper urging the adoption of a particular economic policy be a positive or normative statement?

Exercise A3 What dome slices of a pie chart represent?