1. Suppose individuals' utility depends only on two "bads" in that the marginal utilities of them are negative. There are no "goods." The firms operate in a perfectly competitive market, and it is costly to reduce the bads. Draw the indifference and iso profit curves and explain how the matching would work in this setting.

2. Yearly working hours in the United States have been rising over the past two decades, on average, and they are roughly twenty percent higher than in many European countries (where paid vacation days are much more frequent). Currently, some American employers offer as little as one week of paid vacation, while others offer four or more. Suppose that the U.S. government believes that workers should have more leisure time to spend with family and friends - and that it therefore mandates that all employers offer at least four weeks of paid vacation to their employees. Use economic theory, both positively and normatively, to assess the effects of requiring four weeks of paid vacation on the well- being of employees.