If Jane is currently willing to trade 4 movie tickets for 1 basketball ticket, then she must like basketball better than movies. True or false? Explain.

Understand that cells are the basic unit of life.

Write the basic unit of life.

In Example $2.8$ (page 52), we discussed the recent increase in world demand for copper, due in part to China's rising consumption.

a. Using the original elasticities of demand and supply (i.e., $E_S=1.5$ and $E_D=-0.5$ ), calculate the effect of a 20-percent increase in copper demand on the price of copper.

b. Now calculate the effect of this increase in demand on the equilibrium quantity, $Q^*$.

c. As we discussed in Example 2.8, the U.S. production of copper declined between 2000 and 2003. Calculate the effect on the equilibrium price and quantity of both a 20-percent increase in copper demand (as you just did in part a) and of a 20-percent decline in copper supply.

In Example 2.8 we examined the effect of a 20-percent decline in copper demand on the price of copper, using the linear supply and demand curves developed in Section 2.6. Suppose the long-run price elasticity of copper demand were $-0.75$ instead of $-0.5$.

a. Assuming, as before, that the equilibrium price and quantity are $P^*=\$ 3$ per pound and $Q^*=18$ million metric tons per year, derive the linear demand curve consistent with the smaller elasticity.

b. Using this demand curve, recalculate the effect of a 20-percent decline in copper demand on the price of copper.

In 2010, Americans smoked 315 billion cigarettes, or $15.75$ billion packs of cigarettes. The average retail price (including taxes) was about $\$ 5.00$ per pack. Statistical studies have shown that the price elasticity of demand is $-0.4$, and the price elasticity of supply is $0.5$.

a. Using this information, derive linear demand and supply curves for the cigarette market.

b. In 1998, Americans smoked $23.5$ billion packs of cigarettes, and the retail price was about $\$ 2.00$ per pack. The decline in cigarette consumption from 1998 to 2010 was due in part to greater public awareness of the health hazards from smoking, but was also due in part to the increase in price. Suppose that the entire decline was due to the increase in price. What could you deduce from that about the price elasticity of demand?

The rent control agency of New York City has found that aggregate demand is $Q_D=160-8 P$. Quantity is measured in tens of thousands of apartments. Price, the average monthly rental rate, is measured in hundreds of dollars. The agency also noted that the increase in $Q$ at lower $P$ results from more three-person families coming into the city from Long Island and demanding apartments. The city's board of realtors acknowledges that this is a good demand estimate and has shown that supply is $Q_S=70+7 P$.

a. If both the agency and the board are right about demand and supply, what is the free-market price? What is the change in city population if the agency sets a maximum average monthly rent of $\$ 300$ and all those who cannot find an apartment leave the city?

b. Suppose the agency bows to the wishes of the board and sets a rental of $\$ 900$ per month on all apartments to allow landlords a "fair" rate of return. If 50 percent of any long-run increases in apartment offerings comes from new construction, how many apartments are constructed?

Explain why two indifference curves cannot intersect.

Can a set of indifference curves be upward sloping? If so, what would this tell you about the two goods?

Public television is funded in part by private donations, even though anyone with a television set can watch for free. Can you explain this phenomenon in light of the free rider problem?

George and Stan live next door to each other. George likes to plant flowers in his garden, but every time he does, Stan's dog comes over and digs them up. Stan's dog is causing the damage, so if economic efficiency is to be achieved, it is necessary that Stan pay to put up a fence around his yard to confine the dog. Do you agree or disagree? Explain.

The kinked demand curve describes price rigidity. Explain how the model works. What are its limitations? Why does price rigidity occur in oligopolistic markets?

The utility that Meredith receives by consuming food $F$ and clothing $C$ is given by $U(F, C)=F C$. Suppose that Meredith's income in 1990 is $\$ 1200$ and that the prices of food and clothing are $\$ 1$ per unit for each. By 2000, however, the price of food has increased to $\$ 2$ and the price of clothing to $\$ 3$. Let 100 represent the cost of living index for 1990. Calculate the ideal and the Laspeyres cost-of-living index for Meredith for 2000. (Hint: Meredith will spend equal amounts on food and clothing with these preferences.)