1. Try to explain as best as you can each of the following statements using the concepts of supply and demand (2 points):

- "When cold weather hits Florida, the price of orange juice rises in supermarkets throughout the country."

- "When summer comes, the price of ice cream rises, but it drops in the fall"

2. Describe some of the trade-offs faced by each of the following (5 points):

a) a family deciding whether to buy a new car.

b) a member of Congress deciding how much to spend on national parks.

c) a company president deciding whether to open a new factory.

d) a professor deciding how much to prepare for class.

e) a recent college graduate deciding whether to go to graduate school.

3. You are trying to decide whether to take a vacation. Most of the costs of the vacation (airfare, hotel, etc.) are measured in financial costs, but the benefits of the vacation are psychological. How can you compare the benefits to the costs? (1 point)

4. You were planning to spend Saturday working at your part-time job, but a friend asks you to go skiing. What is the true cost of going skiing? Now suppose you had been planning to spend the day studying at the library. What is the cost of going skiing in this case? Explain. (2 points)