1. You are selling your 1996 Mustang. You have already spent $1000 on repairs. At the last minute, the transmission dies. You can pay $600 to have it repaired, or sell the car “as is.” In each of the following scenarios, should you have the transmission repaired? Explain. A. Blue book value is $6500 if transmission works, $5700 if it doesn’t B. Blue book value is $6000 if transmission works, $5500 if it doesn’t A C T I V E L E A R N I N G 1 Applying the principles 0

2. Hurley’s income: $1200 Prices: P F = $4 per fish, P M = $1 per mango A. If Hurley spends all his income on fish, how many fish does he buy? B. If Hurley spends all his income on mangos, how many mangos does he buy? C. If Hurley buys 100 fish, how many mangos can he buy? D. Plot each of the bundles from parts A – C on a graph that measures fish on the horizontal axis and mangos on the vertical, connect the dots. A C T I V E L E A R N I N G 1 Budget Constraint 1

3. Show what happens to Hurley’s budget constraint if: A.His income falls to $800. B.The price of mangos rises to P M = $2 per mango A C T I V E L E A R N I N G 2 Budget constraint, continued. 2

4. $2 D Fish Deriving Hurley’s Demand Curve for Fish 350 Quantity of Fish Quantity of Mangos Quantity of Fish Price of Fish 150 A B $4 A 350 B 3 A: When P F = $4, Hurley demands 150 fish. B: When P F = $2, Hurley demands 350 fish.