PLEASE WRITE ON PAPER WITH PEN AND PAPER FOR GRAPHS

Question $1(20$ points$)$: In a relevant graph, please show the impact of the price of X falling and

the consumer choosing to consume more of Good X and of Good Y$.$ Regarding Good X$,$ please

decompose the Total Effect $($TE$)$ into a Substitution Effect $($SE$)$ and an Income Effect $($IE$).$

Assume normal shaped indifference curves. Please be sure to label your graph completely. No

written explanation is needed.

Question $2(20$ points$)$: True$/$False$/$Uncertain$.$The introduction of the food stamp program

$($i$.$e$.,$ a type of voucher$-$style in$-$kind benefit$)$ will definitely increase food consumption$.$

Assume normal shaped indifference curves. Please evaluate the above statement using a

graph, and explain your graph in words. Please answer in the context of our in$-$class discussion.

Question $3(20$ points$)$: Please explain why a firm can lose money in the short$-$run, yet still

remain in business $($i$.$e$.,$ not shut down$),$ using a properly labelled graph. Be sure to explain

what is going on in your graph in words $($i$.$e$.,$ why the firm can remain in business$).$ Be sure to

answer in the context of what we have learned in class.

Question $4(20$ points$)$: True$/$False$/$Uncertain: $$A price ceiling imposed on an unregulated

competitive market will reduce total surplus and definitely make both consumers and producers

worse off$.$ Assume normal$-$shaped supply and demand curves. Please answer using a graph.

Be sure to also include an appropriate explanation in words, and to answer in the context of our

in$-$class discussion.

Question $5(20$ points$)$: True$/$False$/$Uncertain: $$A per$-$unit tax imposed on a polluting firm may

increase total surplus$$ Assume normal$-$shaped demand and supply curves. Please evaluate the

statement in quotations as being True, False or Uncertain using a graph and explain in words.