1.2 Soft drink advertising. (5%) The soft drink producer may use TV advertising for stimulation of sales. The cost of advertising is 20 000 euro per 30 seconds commercial, but after ten commercials per day there is a discount of 50% for all additional commercials. How much TV advertising should be bought if it is known that the first commercial increases the revenue at 100 000 euros, but every additional commercial has a 10 000 lower return that the previous one

2. 3. Optimal number of children (10%) Provide marginal analysis of the choice of number of children a person prefers to have. Explain shape of all functions you draw. (Draw your answer on paper and insert a photo of this drawing in this file, instead of my template. If you cannot do this, describe the shape of curves in all graphs by words). a) for average man b) for average woman c) for Rich family-lover man d) Rich society lioness

3. Alburg and Bewille (20%) There are two cities on the opposite sides of the river: Alburg and Bewille. The demand and supply for milk in Alburg is described by functions: Qs= 0,5P - 100 and Qd = 2000 - P. The demand and supply for Bewille is described as: Qs= 0,5P - 200 and Qd = 2800 - P. a) Find equilibrium prices and output of milk in both cities if there is no bridge or ferry service between them. b) How equilibrium will change if there is a bridge and the transportation costs are zero. c) How equilibrium will change if transportation of 1 liter of milk from one city to another costs 10. d) How equilibrium will change if the city administration of Alburg introduces 5% tax on sale (every buyer should pay 5% from every purchase to city budget)? (let us suppose that transportation costs are again zero).

4. 5. Export ban (20%) Russian government introduced the export ban for European food. List all markets which will be affected by this decision and explain how equilibrium will change in these markets (you may describe shifts of curves and change in prices and quantities by words, i.e. without graphs).