Perfect substitutes almost always have boundary solutions, which are found in a different way than interior optima. The demand functions from perfect substitutes are contingent; specifically, they depend on the slopes of the indifference curves and the budget line. Consider a utility function u(x1,x2)=ax1+bx2 and a general-form budget line p1x1+p2x2=m.

If the absolute value of the slope of the indifference curve, a/b, is greater than the absolute value of the slope of the budget line, p1/p2, the consumer will find it optimal to consume.

1. Choose one:

a. any combination of goods 1 and 2 she can afford.
b. all of good 2 she can afford and none of good 1.
c. a combination of goods 1 and 2 such that exactly half her income is spent on each good.
d. all of good 1 she can afford and none of good 2.

2. In such a case, demand for good 1 is x∗1(p1,p2,m)=x1∗(p1,p2,m)=

a. m/p2
b. m/2p2
c. 0
d. m/p1
e. m/2p1

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Following is a list of various costs incurred in producing replacement automobile parts. with respect to the production and sale of these auto parts, classify each cost as either variable costs, fixed costs, or mixed costs. 1. oil used in manufacturing equipment 2. plastic 3. property taxes, $165,000 per year on factory building and equipment 4. salary of plant manager 5. cost of labor for hourly workers 6. packaging 7. factory cleaning costs, $6,000 per month 8. metal 9. rent on warehouse, $10,000 per month plus $25 per square foot of storage used 10. property insurance premiums, $3,600 per month plus $0.01 for each dollar of property over $1,200,000 11. straight-line depreciation on the production equipment 12. hourly wages of machine operators 13. electricity costs, $0.20 per kilowatt-hour 14. computer chip (purchased from a vendor) 15. pension cost, $1.00 per employee hour on the job

The following accounts appeared in recent financial statements of delta air lines. identify each account as either a balance sheet account or an income statement account. for each balance sheet account, identify it as an asset, a liability, or stockholders' equity. for each income statement account, identify it as a revenue or an expense. item financial statement type of account accounts payable balance sheet advanced payments for equipment balance sheet air traffic liability balance sheet aircraft fuel (expense) income statement aircraft maintenance (expense) income statement aircraft rent (expense) income statement cargo revenue income statement cash balance sheet contract carrier arrangements (expense) income statement flight equipment balance sheet frequent flyer (obligations) balance sheet fuel inventory balance sheet landing fees (expense) income statement parts and supplies inventories balance sheet passenger commissions (expense) income statement passenger revenue income statement prepaid expenses income statement taxes payable balance sheet