Bill is a student obsessed with stationery. Bill gets utility only from Mechanical Pencils (MP) and legal Note Pads (LP). Bill only purchases BIC brand Mechanical Pencils and APP brand legal Pads. He purchases these goods at the Marvin Center bookstore. Bill has $24.00 to (M=24) spend; the price of a Mechanical Pencil is $2.00 (PMP=2), and the price ofa legal Pad is $4.00 (PLp=4). 7K4) What conditions must hold if Bill is maximizing his utility? When Bill maximizes his utility, he consumes four (4) legal Pads (LP) and four (4) Mechanical Pencils (MP). 3X4} Construct a consumption diagram findifference curve etc. 7 with Mechanical Pencils (MP) on the horizontal axis and Legal Pads (LP) on the vertical axis. (Label all points, lines, etc.) On the last day of class, the George Washington Bookstore offered a clearance special. The price of a Mechanical Pencil (MP) was only $1.00 (PMP=1) while the price of a legal Pad (LP) remained at Sal-.00 (PLp=4). Bill's utility maximizing consumption bundle for the last day of class was three (3) legal Pads (LP) and twelve (12) Mechanical Pencils (MP). 9)(4) Construct another consumption diagram using the information from question 8 and the new consumption bundle from the last day of class. Put Mechanical Pencils (MP) on the horizontal axis and legal Pads (LP) on the vertical axis. That is. show the effect of changing from the regular price to the clearance price on the same diagram. (Label all points, lines. etc.) 10)(6} Find the giuation for. and gag, Bill's demand curve for Mechanical Pencils(MP). (Assume the demand curve is a straight line.) 11)\") Find the Price Elasticity of demand for Mechanical Pencils (MP) using the demand curve from question 10. Use the prices provided above ($1.00 and $2.00) to calculate the Price Elasticity. Categorize the price elasticity you calculated. Consider the market for Smart Watches. 12)(4) Is the market for Smart Watches perfectly competitive? Why? Regardless of your answer to question 12, assume the Smart Watch market is properly modeled using the perfectly competitive model. The (inverse) market demand for Smart Watch is l P = 24 Q 3 and the supply curve is given by l = Q 6 13)(4) Find and Graph the equilibrium price and quantity in the market for Smart Watches. The government considers imposing a tax of $4 per Smart Watch. 14)(4} Find and sketch the proposed tax's post-tax equilibrium 1 5)(4) What would be the incidence of the tax on the consumer and the producer? 16)\") Identify any deadweight loss because of this tax on your diagram from question 14.Wl1at would be the value of any deadweight loss to welfare? Continuing with the Smart Watch market, the government decides not to impose any tax. A rm in the Smart Watch industry has a total cost curve of TC = 24 + 3 Q 3 And correspinding marginal cost of MC = 1 Q 3 13(4) Find the quantity and cost at the lowest point of the average total cost curve (minimum efcient scale) for a rm in the Smart Watch industry. 18)(4) Given the above costs and market, how many (identical) firms would be in the perfectly competitive market described above?[Recall from last section that the market demand is P224 l/3Q] 19)[10) Instead of perfect competition, assume that there is a Smart Watch monopolist, Apple, in the market. Using the cost structure from above and the market demand curve nd, and graph, the prot, consumer surplus, and [long-run} deartweight loss generated by Apple in the Smart Phones market. 20)\") According to the information you have to work with above, is the market for Smart Watches properly considered a Natural Monopoly in the long run? Why