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- Some finance experts advise consumers not to worry aboutrising gasoline prices, the cost of which can easily be coveredby forgoing one takeout meal a month, but to worry abouthow high energy prices will affect the rest of the economy. Forexample, each dollar-a-barrel price increase is equivalent toa $20 million-a-day “tax” on the economy. Explain what thismeans.4. Capital M2. A small college is trying to predict enrolment for the next academic year. Thevice president for business states that enrolment has tended to follow apattern described by E = 18,000 – 0.5P, where E denotes total enrolment andP is yearly tuition.a) If the school sets tuition at €20,000, how many students can it expect to enrol?b) If the school wants to maximize total tuition revenue, what tuition should itcharge?c) As the vice president for business, what tuition would you recommend? Explainbriefly.d) Due to a strong post-COVID-19 recovery, the income conditions in the regionimprove substantially. Explain in one sentence how this could affect the college’senrolment pattern and the enrolment level maximizing its tuition revenue.Let's assume that prices substantially increased over the past year. How do you expect this will affect people's buying behavior? Be sure to tie this back to economic concepts discussed in this course. Time Atten 33 M.
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- No written by hand solution Suppose there is an increase in lump sum taxes. Describe and illustrate the impact on consumers’ optimal choices for consumption, leisure, and labor supply with a graph. What is the impact on consumer welfare?What assumptions about the economy must he true for the invisible hand to work? To what extent are those assumptions valid in line real world?A consumer has utility u(x,y,z)= ln(x) + 2ln(y) + 3ln(z) over the three goods, x,y and z and pZ = 1 . Optimally sheconsumes 30 units of z. What is her income? How much money does she spend on x?(HINT: MUX =??, MUY =??, MUZ =??and remember the “equivalent bang for the buck” condition)(b) Forget about (a). Suppose you have t = 29 hours in total to spend on 3 projects X, Y and Z to make some money.If you spend x hours on project X, you make 2√? dollars;If you spend y hours on project Y, you make ?√? dollars;If you spend z hours on project Z, you make ?√? dollars;Writing down your “utility function” u(x,y,z) and the constraint, solve the utility maximization problem; what isthe optimal amount of time to spend on x ? on y? on z ?