1.) Parvez, a pharmacology student, has allocated $120 per month to spend on paperback novels and used CDs. Novels cost $8 each; CDs cost $6 each. Draw a budget line.
a.) Draw and label a second budget line that shows what happens when the price of the CS rises to $10.
b.) Draw and label a third budget line that shows what happens when the price of a CD rises to $10 and Parvez's income rises to $240

2.) The following table shows total output (in tax returns competed per day) of the accounting fix of Hoodwink and Finagle

Number of Accountants Number of returns per day

0 0

1 5

2 12

3 17

4 20

5 22

Assuming the quanity of Capital (computers, adding, machines, desks, ect.) Remains constant at all output levels:

a.) Calculate the marginal product of each accountant

b.) Over what range of employment do you see increasing returns to labor? Diminishing returns?

c.) Explain why MPL might behave this way in the context of an accoutning firm?