1. Leopold "Butters" Stotch (hereafter referred to as Butters) works as Paris Hilton's pet bear. He is considering a binary choice today. Starting from now, Butters' lifetime earnings as a pet bear will be $10,000,000. His lifetime expenses in this job will be $50,000 in dry cleaning of his bear suit, $200,000 in food (because Paris only gives him bear food), and $3,000,000 in costs associated with failed escape attempts. Instead, Butters could become an author; not just any author, but the genius voice of our generation who changes literature as we know it (like Kanye or Pitbull, but for books). His lifetime earnings as an author would be $8,000,000. His expenses for this job would be $20,000 in materials and office equipment, along with $500,000 for a rural home in which to work and live. He would have to borrow the money for those expenses, and he would have to pay back $10,000 in interest. Finally, while he is unemployed and working on his first novel, he could be earning $500,000 working as Paris Hilton's pet bear.

What is Butters' accounting profit of being Paris Hilton's pet bear (show your work)?
What is Butters' accounting profit of becoming an author (show your work)?
What is Butters' economic profit of being Paris Hilton's pet bear (show your work)?
What is Butters' economic profit of becoming an author (show your work)?
Butters must make a binary choice. Should he be Paris Hilton's pet bear, or should he become an author? Why should he make that choice?
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2. Yamaha produces a wide variety of pianos. Below are their marginal costs and marginal benefits for producing various quantities of the C3 Grand Piano. Examine those two charts in order to fill in the third chart and answer the questions below.
Total Costs for a Yamaha C3 Grand Piano

Quantity (# of pianos)	Total Benefit
0	$0
1	$150,000
2	$250,000
3	$300,000
4	$340,000
5	$360,000

Quantity	Marginal Benefits	Marginal Costs	Additional Profit	Total Profit
0
1
2
3
4
5

b. First, what two things should a firm equalize when determining its quantity? In other words, a firm will produce at the intersection of what two curves? Second, what quantity of C3 Grand Pianos will Yamaha produce?

3. You spent $45 on a ticket to see Louis C.K. perform standup at a theater in Tampa. Your friend calls you up immediately before the show and offers to take you to see a Bruno Mars show instead. She has an extra ticket that you can use, and you think Bruno Mars with your friend sounds like more fun than dark comedy alone. Louis C.K. doesn't allow people who purchase tickets to his concerts to resell them. What should you, as an economic agent, do?
Go to the Louis C.K. concert because you spent $45 on it.
Go to the Bruno Mars concert because the $45 you spent is a sunk cost.
Stay home and cry into a bucket of half-melted chocolate ice cream.

1. You missed your fry up (your usual meal of eggs, beans, toast, tomato, pudding, tea, etc.) for breakfast, and you've been working from early in the morning until midday. You are hungry for lunch, and you have £12 (twelve British pounds) to spend. An order of mushy peas costs you £2, and an order of chips is £1. Given your budget constraint of £12, you can buy, at maximum, either 6 orders of mushy peas or 12 orders of chips. You are a utility-maximizing agent.

Mushy Peas

Quantity Mushy Peas	Total Utility	Marginal Utility	Price	MU/P
1	120	120
2	200	80
3	260	60
4	290	30
5	300	20
6	304	4

Chips

Quantity Chips	Total Utility	Marginal Utility	Price	MU/P
1	110	110
2	200	90
3	270	70
4	325	55
5	365	40
6	395	30
7	420	25
8	440	20
9	442	2

How many orders of peas do you buy (fill in the price and MU/P columns to get you started)?

How many orders of chips do you buy (fill in the price and MU/P columns to get you started)?