1) Potatoes cost Janice $0.50 per kilogram, and she has $6.00 that she could possibly spend on potatoes or other items. If she feels that the first kilogram of potatoes is worth $1.50, the second kilogram is worth $1.14, the third kilogram is worth $1.05, and all subsequent kilograms are worth $0.30, how many kilograms of potatoes will she purchase? What if she only had $3.00 to spend?

Janice will purchase________with her original $6.00 of income.

Janice will purchase________when her income is $3.00.

2) Let's put dollar amounts on the flows in the circular flow diagram below.

FIGURE 2-2 The Circular Flow Diagram Factors of production flow from households to businesses through the factor market, and products flow from businesses to households through the product market. Opposite these real flows are monetary flows. Households receive income from businesses (their costs) through the factor market, and businesses receive revenue from households (their expenditures) through the product market. FACTOR Money inc costs MARKET . Households sell s of production Firms buy Labour, land, nterest, profits) preneuri, (wages, rents, Factors of , capital, entre- ial ability BUSINESSES HOUSEHOLDS . Buy factors of . Sell factors of production production Sell products Buy products Goods a services and services PRODUCT MARKET Goods and ser expenditures . Firms sell Revenue Households buy Consumption expRefer to the table below. If the six people listed in the table are the only producers in the market and the equilibrium price is $9, how much producer surplus will the market generate if each person has only one unit of the good to sell? (2) (3 ) (1) Minimum Actual Price Person Acceptable Price (Equilibrium Price) Carlos $ 5 $9 Courtney 6 9 Carla 7 9 Cindy 8 9 Carmela g 9 Chad 10 9 Instructions: Enter a whole number as your answer. Total producer surplus: $