1. Consider the market for Feisty Pets, one of my family's favorite annual Christmas gifts. Depict this US market for Feisty Pets graphically using the model of supply and demand.

On the same graph, illustrate what would happen to this market if (i) backups and delays in global supply chains mean that some manufacturers of Feisty Pets decide to not ship their toys to the US (they are manufactured abroad) while at the same time, (ii) increases in the child tax credit boost incomes for millions of US households leading up to Christmas? Illustrate graphically, discuss why the curves shifted the way they did, and conclude regarding to the changes in equilibrium.

2.

You own a company that designs and makes onesies for babies. You essentially have three different types of designs for any theme and color scheme: rst there are your standard oral prints that grandparents love; then there are the ones with cute animals; lastly, there are ones with silly sayings that crazy aunties like to get their nieces and nephews. The market has three types of consumers grandparents, parents, and crazy aunties and there are equal amounts of each in the market. You must decide on a pricing strategy for your onesies. Each consumer will purchase at most 1 of each type of onesie. The consumers' valuations of the goods are listed in the following table. Assume for this problem that the costs of production are zero. Consumer Valuations Consumer , Silly Floral Animals _ Types Sayings Grandparents $10 Pa rents .- Crazy 7 5 12 Find the optimal separate prices for each type of onesie, and solve for the optimal price for a bundle of all three. Which strategy should you prefer - selling onesies separately or as a bundle? Explain. You are a manager at Boston Brew'ns, the ofcial microbrewery of the Boston Bruins. Applying what you learned at Cal State East Bay prior to moving to the east coast, you have estimated the cost function for brewing beer to be 0(6)) 2 2 + Q l- %Q2 . Further, you have estimated the elasticity of demand for your signature beer, nding it to be as = 1.5. Your rm has some price setting power because you and the other breweries in town offer differentiated products. The rm is currently charging a price of $6 per beer and selling 100 beers. Is this a prot- maximizing price? Explain. Should you increase or decrease the markup? Explain