# 3. A local hardware store is trying to decide whether to stay open. They have found that their industry is extremely competitive and profits have shrunk considerably. Knowing that you have taken an economics course the owners have asked for your opinion. Draw a completely labeled graph to help you explain the shutdown decision. You should show two graphs in your answer, one for the market as a whole, and one for this store in particular. Assume that the store is losing money; however, explain why they may want to stay open for a little while longer. (NOTE: Your answer should be a written explanation of your graph.) 4. What combination of the two goods below allows you to maximize your utility with a budget constraint of \$14? Show how you arrived at your conclusion in the space provided below. Place your final answers on the lines at the bottom of this page. PRICE = \$0.50 per pint Bottles of glue Total Utility (Utils) 1 15 2 23 3 30 4 35 5 38 6 40.5 PRICE = \$2.00 per box Bales of hay Total Utility (Utils) 1 10 2 22 3 36 4 52 5 70 6 90

3. A local hardware store is trying to decide whether to stay open. They have found that their industry is extremely competitive and profits have shrunk considerably. Knowing that you have taken an economics course the owners have asked for your opinion. Draw a completely labeled graph to help you explain the shutdown decision. You should show two graphs in your answer, one for the market as a whole, and one for this store in particular. Assume that the store is losing money; however, explain why they may want to stay open for a little while longer. (NOTE: Your answer should be a written explanation of your graph.)

4. What combination of the two goods below allows you to maximize your utility with a budget constraint of \$14? Show how you arrived at your conclusion in the space provided below. Place your final answers on the lines at the bottom of this page.

PRICE = \$0.50 per pint

Bottles of glue Total Utility (Utils)

1 15

2 23

3 30

4 35

5 38

6 40.5

PRICE = \$2.00 per box

Bales of hay Total Utility (Utils)

1 10

2 22

3 36

4 52

5 70

6 90