Question

1) Noah likes hot dogs and Coca-Cola. Hot dogs cost $1 each and Cokes cost $.50 per bottle There is a special promotion for Coke that will last for one month. If Noah sends in the bottle tops from the Cokes he drinks during the next month, he will get a refund of $.20 for every bottlecap beyond the first 12 that he returns. For example, if he returns 25 bottle caps he will get back $2.60 $.20(25 12). Noah has $40 to spend on hot dogs and Coke during the next month. Draw his budget line with Coke on the horizontal axis and hot dogs on the vertical axis. Find the points where the budget line hits the axes and the point where it has a kink. At each of these three points write down the quantities of each good consumed 2) Max lives on Snickers Bars and Doritos. The price of Snickers (S) is 2 dollars per bar and the price of Doritos (D) is 1 dollar per bag. Max allows himself to spend no more than 10 dollars a day on food. He also restricts his consumption to 5,000 calories per day. There are 500 calories in a Snickers Bar and 1000 calories in bag of Doritos. Assume that Max spends his entire money budget each day and consumes no more calories than his limit. a) Draw Max's Budget constraint and calculate the MRT. Put Snickers on the Y-Axis b) Draw Max's caloric constraint. c) Identify the set of possible bundles that satisfy Max's budget and caloric constraint? d) What is the highest number of Snickers bars Max could feasibly consume? Would he have income left if he did that? Does he meet his caloric constraint? e) What is the largest number of bags of Doritos he could feasibly consume? Would he have income left after that? Does he meet his caloric constraint? f) What combination of Snickers and Doritos would he consume if wanted to spend all his money and consume 5,000 calories? 3) Lori is studying economics and political science. She can read 30 pages of political science per hour but only 5 pages of economics per hour. This week she has a 50-page assignment in economics and a 150-page assignment in political science. Because of her job, she cannot devote more than 10 hours to studying these subjects this week. She realizes she cannot complete all of her assignments but is determined to complete at least 30 pages of her economics reading. Draw a graph with pages of economics on the horizontal axis and pages of political science on the vertical axis. On this graph, show the possibilities that are consistent with the constraints that Lori has imposed on herself. (She is allowed to read ahead in either subject.) Label key points on your graph with their numerical values

Answer 1

The cost of first 12 cola = 12 (0.5) = 6 Remaining money = 40 - 6 = 34 No of additional cokes = 34/0.3 The no of cokes which could be bought by Brenda if she spends all of her money = 12 + 113.5 = 125.3 (the point on horizontal axis)