Economics Problems Assignment

Economics Problems Assignment


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Problem 1
Draw indifference curves representing the following individuals' preferences for Hemingway novels and issues of Sports Illustrated (SI) magazine. Please provide answers to the questions as well.
a. Cy is an English teacher, soccer coach, and passionate Dallas Cowboys fan. He loves both literature and sports trivia. However, when he reads too many novels in a period he craves current sports stories, and vice versa. What happens to Cy's MRS of SI issues for Hemingway novels as he reads more SI issues?
(HINT: remember that we define MRS as "x" for "y" and draw your graph accordingly.)
b. Ernest only reads for the sake of learning new vocabulary. The content of what he reads does not matter to him as long as he encounters new words. He learns twice as many new words from a Hemingway novel as from an issue of SI. What happens to Ernest's MRS of SI issues for Hemingway novels as he reads more SI issues? What type of goods are these for Ernest?
c. Ozlem loves American novels. And, though she is married to a college basketball coach, she derives no pleasure from reading about sports. What happens to Ozlem's MRS of SI issues for Hemingway novels as she reads more SI issues?

Problem 3
Mara and Christina each have an income of $900 which they spend entirely on jeans and pairs of shoes. They exclusively buy a brand of jeans that sells for $75 a pair and shoes that sell for $50 a pair.
a. On two separate graphs, draw Mara and Christina's budget constraint with jeans on the y-axis.
b. What is the equation of the budget constraint? Provide nonmathematical interpretations of the y-intercept, x-intercept, and slope.
c. Draw an indifference curve for Christina showing that she optimally allocates her income to 12 pairs of shoes and 4 pairs of jeans. What is the ratio of her marginal utility of shoes to her marginal utility of jeans at...