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In: Economics

Clark can bake a cake in two hours of his time and 10 dollars worth of...

Clark can bake a cake in two hours of his time and 10 dollars worth of ingredients. Assuming the day has 8 working hours (9 am to 5 pm) and Clark schedule is as follows: from 9 am until1pm he works at a job where he makes 20 dollars per hour and from 1 pm until 3 pm he works at a job where he makes 15 dollars per hour. From 3 pm until 5 pm Clark goes to the gym and derives pleasure that is worth to him 40.

a)(5points)If Clark wants to make one cake, what time of the day should he choose to do so(i.e.what activity should he miss)? What principle should Clark follow in making his choice?

b)(5points)What is the opportunity cost of baking a second cake? Justify your answer.c)(10 points)Draw Clark′ssupply for cake. Carefully justify your answer.

d)(5points)Suppose that Clark wants to sell his cake(s)toBetty.Betty′swillingness to pay for a cake is 40. How may cakes will be traded in equilibrium? At what price? Carefully justify your answer. e) (5 points) What is Clark Economic surplus in equilibrium? Justify your answer.

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Rahul Sunny answered 1 year ago
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