Ms. Q. Moto loves to ring the church bells for up to 10 hours a day. Where m is expenditure on other goods, and x is hours of bell ringing, her utility is u(m, x) = m + 3x for x ≤ 10. If x > 10, she develops painful blisters and is worse off than if she didn’t ring the bells. NAME 189 Her income is equal to $100 and the sexton allows her to ring the bell for 10 hours.
(a) Due to complaints from the villagers, the sexton has decided to restrict Ms. Moto to 5 hours of bell ringing per day. This is bad news for Ms. Moto. In fact she regards it as just as bad as losing $15 dollars of income.
(b) The sexton relents and offers to let her ring the bells as much as she likes so long as she pays $2 per hour for the privilege. How much ringing does she do now? ______. This tax on her activities is as bad as a loss of how much income? ______.
(c) The villagers continue to complain. The sexton raises the price of bell ringing to $4 an hour. How much ringing does she do now? ______. This tax, as compared to the situation in which she could ring the bells for free, is as bad as a loss of how much income? ______.