5. Consider the decision of a farmer, Nicholas, who produces wheat in a perfectly competitive market.

a) List three characteristics of a perfectly competitive market. Does wheat appear to meet these conditions?

b) The table below shows the fixed and variable costs that Nicholas faces to produce different quantities of wheat. If the current equilibrium price in the wheat market is $15 per bushel, how many bushels of wheat will Nicholas produce and sell? How much profit (or loss) will Nicholas make?

1.8 [Related to Solved Problem 10.1] Joe has $16 to spend on Twinkies and Ho-Hos. Twinkies have a price of $1 per pack. and Ho-Hos have a price of $2 per pack. Use the informa- tion in the following graphs to determine the number of Twinkies and Ho-Hos packs Joe should buy to maximize his utility. Briefly explain your reasoning. Marginal 20 utility of 18 Ho-Hos 16 14 F 12 10 Marginal utility of Ho-Hos 2 6 8 10 12 Quantity of Ho-Hos (number of packs) Marginal 12 utility of Twinkies 10 8 Marginal utility 6 of Twinkies 4 2 2 5 6 Quantity of Twinkies [number of packs)