Mean: 27.0, Max: 46

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Mean 27.0, Max 46
This is just a suggested grade based on your
midterm performance
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• An answer key to Midterm I is available on our
  course website.
• If you feel you didnt do well in the midterm,
  work with your classmates for homework and use my
  office hours to improve your understanding.

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Q 2

• At utility-maximizing consumption, marginal
  utility per dollar should be equalized over all
  goods!
• If , then spend one more
  dollar
• on bread and one less dollar on juice your
  utility will increase!

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Q 3
5
Q4

• (a)
• - To draw demand curves, make sure you find the
  right intercepts and slopes!
• - When adding up the demands in West and East
  P., you should do so horizontally

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Q5 (a)

• With cash instead of food stamps, the family
  chooses basket C on U3, which is preferred to
  point B on U2, the utility-maximizing consumption
  given food stamps.

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• Next Aplia HW The Cost of Production in the
  Short Run II
• due on Sunday Oct 8
• The Cost of Production in the Long Run II will
  be due next week

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Q5 (b)
Do food stamps ensure that low income families
increase their consumption of food? Explain. You
may use graphs.
The answer is Food stamps do NOT NECESSARILY
ensure that low income families increase their
consumption of food.
The point of this question is that consumtion of
a good does not always increase when income
increases (i.e. the income effect can be
negative, or equivalently, a good may be an
inferior good.) This possible exists regardless
of whether income increase is due to cash subsity
or food stamps.
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Q5 (b)

• If food is an inferior good over the relevant
  income range, then food consumption with food
  stamps (F2) can be less than that without (F1).

F2
F1
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• Note that we are not saying food stamp is a bad
  idea (or a good idea)
• Why food stamp could be an issue recent trends
  in obesity and nutrition
• Concerns about midterm? Let me know
• Today my office hour is shorter than scheduled
  130-230.

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Ch 7 Cost of production (cont.)

• Recall the definition of various costs in the
  short run
• Total Cost (TC)
• Fixed Cost (FC), Variable Cost (VC)
• Marginal Cost (MC)
• Average Fixed Cost (AFC), Average Variable Cost
  (AVC). Average Total Cost (ATC)

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FC and AFC
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Marginal cost
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Average total cost (ATC) and Average
variable cost (AVC)
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