1. The Smiths are a low income family with $10,000 available annually to spend on food and shelter. Food costs $2 per unit and shelter costs $1 per square foot per year. The Smiths are currently dividing the $10,000 equally between food and shelter. a. Draw the budget constraint on a diagram with food on the vertical axis and shelter on the horizontal axis. Label their current consumption choice. How much do they spend on food? On shelter? b. Suppose the price of shelter rises to $2 per square foot. Draw the new budget line. Can the Smiths continue to consume the same amounts of food and shelter as previously? C . In response to the increased price of shelter, the government makes available a special income supplement. The Smiths receive a cash grant of $5,000 that must be spent on food and shelter. Draw their new budget line and compare it to the line you derived in part a. Could the Smiths consume the same combination of food and shelter as in part a? Explain. d. With the cash grant and with shelter at $2 per square foot, what can we infer about which consumption bundles on the new budget line the family might consume? 3. A grocery shop is owned by Mr. Moore and has the following statement of revenues and costs: Revenues $250,000 Supplies $25,000 Electricity $6,000 Employee salaries $75,000 Mr. Moore's salary $80,000 Mr. Moore always has the option of closing down his shop and renting out the land for $100,000. Also, Mr. Moore himself has job offers at a local supermarket at a salary of $95,000 and at a nearby restaurant at $65,000. He can only work one job, though. What are the shop's accounting costs? What are Mr. Moore's economic costs? Should Mr. Moore shut down his shop? 3. The following incomplete table shows a firm's various costs of producing up to 6 units of output. Fill in as much of the table as possible. If you cannot determine the number in a box, explain why it is not possible to do so