The following graph depicts three families, X, Y, and Z, and their utility based on spending on education and other goods. Suppose free public education is provided and the new budget constraint is shown in red. Which family (or families) will have its utility unchanged from free public education? Other goods spending G G4 E1 E2 Education spending X and Y O X, Y, and Z X OY

What are four responses to the claim that people should not behave in the way described in this chapter?

Jeremy is deeply in love with Jasmine. Jasmine lives where cell phone coverage is poor, so he can either call her on the land-line phone for five cents per minute or he can drive to see her, at a round—trip cost of 2 in gasoline money. He has a total of 10 per week to spend on staying in touch. To make his preferred choice, Jeremy uses a handy utilimometer that measures his total utility from personal visits and from phone minutes. Using the values in Table 6.6, figure out the points 011 Jeremys consumption choice budget constraint (it may be helpful to do a sketch) and identify his utility-maximizing point.

It is clear that productive inefficiency is a waste since resources are used in a way that produces less goods and services than a nation is capable of. Why is allocative inefficiency also wasteful?

Explain why individuals make Choices that are directly on the budget constraint, rather than inside the budget constraint DI outside it.