(6 pts.) 8. Text, p. 459, #4.7.

Suppose the government relaxes the policy, increase the number of medallion from 80 to 90 (a) the price of tax service will change from $——to $—- (b) the miles of taxi service will change from————-miles to ————-miles (c)at the margin an eluded consumer would be willing to pay up to$———for miles of taxi services, while an excluded supplier would be willing to supply a mile of taxi service at a price as low as $———–

6 pts.) 10. Text, p. 473 #2.4

The equimarginal rule tells us that utility is maximized when a consumer equalize the—–per——on each product consumed.

. 4 pts.) 11. Text, p. 475 #3.4

Arrow up or down: The substitution effect is that a decrease in the price of movies——–the relative price of movies and———the the consumption of movies.

8 pts.) 14. Text, p. 510, #1.8.

Edward the entrepreneur takes two hours to cut a lawn, and he cut 1,000 lawns per year. He uses solar-powered equipment (truck and mower) that will last forever and can be sold at any time for $20,000; Edward could earn $12 per hour as pedicurist. The interest rate is 10 percent.

(a) Given his current output level, compute his marginal cost and average cost of cutting lawns.

(b) Suppose he decides to reduce the number of lawns cut by half, to 500 per year. Compute the new marginal cost and average cost