Question #1: The following table gives H.B.’s satisfaction from carrots and lettuce.

1. 
   
   Suppose H.B. has $6 to spend on carrots and lettuce. If the price of a head of lettuce is $2 and the price of a bag of carrots is $1, how many bags of carrots and heads of lettuce will H.B. purchase, using the theory of rational choice? Assume that she is a rational consumer who wants to maximize her utility. Show (explain) how you obtain your answer. [4 CD
2. 
   If the price of carrots increases to $2 per bag, how many bags of carrots and heads of lettuce will H.B. now purchase, using the theory of rational choice? Assume that she is a rational consumer who wants to maximize her utility. Show (explain) how you obtain your answer. [2 CD$]
   
3. 
   Derive either H.B.’s demand schedule or demand curve for carrots. [4 CD$]
   

Question #2: Nobel Prize-winning economist George Stigler explains how the famous British economist Phillip Wicksteed decided where to live. His two loves were farm fresh eggs, which were more easily obtained the farther from London he was, and visits from friends, which decreased the farther he moved away from London. Given these two loves, describe the decision rule that you would have expected Wicksteed to follow.[10 CD$].

Question #3. How does the principle of diminishing marginal utility underlie the law of demand? [10 CD$]

Question #4 : Case Study: Bank Robbers and Rational Choice

Beginning on August 14, 2004, there were seven bank robberies in Lancaster, PA (population 56,000). Police were puzzled since most prior bank robberies occurred in the suburbs, where suspects had easy access to highways. During banking hours, city streets are usually congested making a robber’s escape more difficult.

Paul McCauley, a professor of criminology at Indiana University of Pennsylvania offered the following: "If you have a series of successful robberies – and it’s important that they are successful – then other folks who are on the fringe of deviant behavior could well make what they believe is a rational choice that, ‘I can do that, too.’ "

Why would the robbers target downtown banks? Mobility of a different type. If there are bank robberies in a specific geographical area, the suspects might have access to a place they can get to. Sometimes it is because they are unable to travel farther.

Why do robbers rob banks downtown?

· It is a rational choice of risk and reward.
· Downtown may be attractive because it is close to home or close to work.
· Some banks have been robbed during lunch breaks!

Source: Robyn Meadows, "Expert Says Successful Bank Robberies Spur More," Lancaster (PA) New Era, September 15, 2004.

Questions:
1. Are the bank robbers maximizing their utility? Are they making a rational choice? Explain your answer. [5 CD$]

2. Would there be diminishing or increasing marginal utility in this activity? Explain your answer. Would the police answer this question differently from the bank robbers? [5 CD$]

ng 3 or 4 robberies, they may get less enticed to commit the next one.

3. Does opportunity cost play a role in robbing banks? Please explain. [5 CD$]

4. Explain why robbers rob banks downtown, using the economic theory of utility. [5 CD$]

Price: $21.43

Solution: The downloadable solution consists of 8 pages, 1343 words and 2 charts.
Deliverable: Word Document