1. Balin likes to run. A lot. Use the table below to graph his marginal benefit and marginal cost curves for running, and determine the optimal number of hours he should run per week. (Hint: This s

1. Balin likes to run.  A lot.  Use the table below to graph his marginal benefit and marginal cost curves for running, and determine the optimal number of hours he should run per week.  (Hint: This should maximize his net benefit.)

Quantity of hours/week              Total benefit (in utils)                   Total cost (in utils)

1                                                       26                                                       2

2                                                       50                                                       6

3                                                       70                                                     11

4                                                       85                                                     18

5                                                       99                                                     27

6                                                       112                                                   39

7                                                       120                                                   53

2. Using the table above, suppose that because of bad weather, Balin’s marginal benefit from running falls by 6 utils for each hour that he runs.  Show how this would affect the graph.  Would it change the optimal amount that Balin should run each week?  Explain.

3. Using the table above (the original numbers), suppose that greater availability of his buddy Bo to play raises Balin’s opportunity cost to run by 3 utils per hour (i.e. the marginal costs rises by 3 utils for each hour).  Show how this would affect the graph (draw a new graph showing the original and the new).  Would it change the optimal amount that Balin should run each week?  Explain.

4. Augi likes doggy treats.  Suppose that Augi gets only one treat per day. Use the table below to indicate which treat she will choose and the opportunity cost of that decision (measured in utils).

Treat                                  Utils received

Chicken jerky                             25

Pupperoni sticks                        34

Cheese                                        28

Cooked chicken                         32

Costco jerky strips                    16

5. In a well-formed paragraph or two, provide an example of how the concept of scarcity can be seen in events surrounding the Covid-19 pandemic, and how that scarcity impacted one or more choices. Carefully explain how the concept is illustrated by the example.

6. In a well-formed paragraph or two, provide an example of how the concept of opportunity cost can be seen in events surrounding the Covid-19 pandemic. Carefully explain how the concept is illustrated by the example.

7. Use the production possibilities model to explain how Covid-19 is impacting the economy of the United States. Your answer should include both a careful written explanation as to how the pandemic is affecting production possibilities and a graph illustrating the effects.

[Notes: 1) Don’t try to capture all the possible effects; focus on one or two aspects of Covid-19 that would affect production possibilities. 2) If you’re unsure what the effects might be, tell me that, but then make your best guess and explain it in a way that is consistent with the production possibilities model. In other words, even if you’re wrong about a particular effect, you can still tell a story about the model that is theoretically sound, given your understanding.]

8. For each of the statements below, select the option that best describes what would happen to supply and demand for the good in italics.   Assume “ceteris paribus” unless otherwise told.

a.  Demand shifts in                              e. Supply shifts in

b.  Demand shifts out                           f. Supply shifts out

c.  Quantity demanded increases      g. Quantity supplied increases

d.  Quantity demanded decreases     h. Quantity supplied decreases

____ 1.  If the price of pizza falls, what happens to the demand for Dr. Pepper (a complement)?

____ 2.  If the price of chicken falls, what happens to chicken nugget supply?

____ 3.  If a sales tax is imposed on chocolate chip cookies, what happens to the supply of chocolate chip

                             cookies?

____ 4.  If a sales tax is imposed on chocolate chip cookies, what happens to the demand for chocolate chip

                             cookies?

____ 5.  If the price of paper falls because of a change in demand, what happens to paper supply?

9. For each of the statements below, select the option that best describes what would happen to the equilibrium price and quantity in the market (noted in italics).   Assume “ceteris paribus” unless otherwise instructed.

a.  Price up, quantity down                    e. Price down, quantity uncertain

b.  Price up, quantity up                         f.  Price up, quantity uncertain

c.  Price down, quantity down               g. Price uncertain, quantity up

d.  Price down, quantity up                    h. Price uncertain, quantity down

____ 1.  Banana consumers experience an increase in their income (bananas are a normal good).

____ 2.  Shoe manufacturers experience an increase in the price of raw materials such as leather and

                             rubber.

____ 3.  U.S. consumers of jelly (to make PB&J sandwiches) witness an increase in the price of peanut butter

                             caused by a decrease in supply.

____ 4.  Consumer fears reduce air travel at the same time security costs are rising.

____ 5.  An increase in wages affects both production costs and demand for running shoes, a normal good.

10. Use the supply and demand model to explain how Covid-19 has impacted a specific market in the U.S. economy. Your answer should include both a careful written explanation as to how the pandemic is affecting supply and demand in the chosen market, as well as a graph illustrating the effects.