Your aunt gives piano lessons for $25 per hour. She also can grow tomatoes, which she can arrange and sell at the local farmer's market. One day she spends 5 hours planting $50 worth of seeds in her garden. Once the seeds have grown into tomatoes, she can sell them for $150 at the farmer's market. Which statement is true? Opportunity cost of growing tomatoes is $125 and she can earn an accounting profit of $100. Opportunity cost of growing tomatoes is $50 and she can earn an accounting profit of $25. Opportunity cost of growing tomatoes is $50 and she can earn an economic profit of $25. Opportunity cost of growing tomatoes is $125 and she can earn an economic profit of $100.

4.

The following graph shows the daily demand curve for bikes in Houston. Use the green rectangle (triangle symbols) to compute total revenue at various prices along the demand curve. Note: You will not be graded on any changes made to this graph. 240 220 200 Total Revenue 180 160 140 120 100 80 60 40 20 0 PRICE (Dollars per bike) 0 9 18 27 > 36 45 54 63 72 QUANTITY (Bikes) 00 8 Demand 90 81 99 106

3. [Sometimes, it's useful to think about what fraction of a consumer's money they spend on each good, rather on how many units they buy. (a) Show that every x EX(p,m) can be written as x = f1(m/p₁,0) + f2(0, m/p2 ) + (1-f1-f2)(0,0) for some numbers f1,f2 20 with f1 + f2 ≤1. (b) Let f1 and f2 be as in part (a). Give an expression, in terms of f1 and f2, for the fraction pix₁/m of the consumer's money that they spend on good 1. (c) Let f1 and f2 be as in part (a). Give an expression, in terms of f1 and f2, for the fraction p2x2/m of the consumer's money that they spend on good 2