Econ 200H: David Reiley
Due Thursday, 14 September 2006

## Problem Set #2

As before, the following exercises come from the end-of-chapter problems in Taylor’s textbook unless otherwise noted.

I suggest attempting the problems for each chapter as you prepare for each day’s class. For example, before the day we cover Chapter 6, please read the chapter and attempt the problems assigned from that chapter. If you find yourself getting stuck on one of the problems, then you’ll know what to ask me about during class (via e-mail). In general, I recommend not spending more than about 20 minutes thinking about any single problem. (Extra-credit problems are an exception – I expect them to take longer, but they are an opportunity for those who are interested in learning more.) If you find yourself spending more time than this, then I recommend making a note to ask me (or emailing me your question), so that I can help you get unstuck, and then move on to the next problem.

1. (5 points) Which gives you more total utility: 15 gallons of water per day, or 20 gallons of water per day? Why?
2. (5 points) At which level of water consumption do you get greater marginal utility: 15 gallons per day, or 20 gallons per day? Why?
3. (10 points) Taylor, problem 5.1.
4. (10 points) Taylor, problem 5.7.
5. (10 points) Taylor, problem 5.8.
6. (10 points) Taylor, problem 6.1.
7. (10 points) Taylor, problem 6.3.
8. (10 points) Taylor, problem 6.4.
9. (10 points) Taylor, problem 6.6.
10. (10 points) Taylor, problem 6.7.
11. (10 points) Taylor, problem 7.1.
12. (10 points) Taylor, problem 7.5.
13. (10 points) Taylor, problem 7.6.
14. (10 points) Taylor, problem 7.7.
15. (10 points) Taylor, problem 7.8.
16. (10 points) Taylor, problem 7.11.
17. (Optional - 25 extra-credit points) Read the Appendix to Chapter 5, on Consumer Theory with Indifference Curves, and answer problems 5A.1-5A.4.
18. (Optional -10 extra-credit points) Find a newspaper article that describes a firm pursuing a goal other than profit maximization. Provide me with a copy of the article (or a link to it), and write a paragraph describing the firm’s objective and whether you think it is a reasonable way for the firm to behave. Students should each come up with their own independent examples, even if they have been working together on the rest of the problem set.