1. George has utility function U(x,y) = 6x²+3y⁴. What is his marginal rate of substitution (MRS)?

a. 2x/y

b. x/y³

c. 2

d. 2x/y³

2.A profit-maximizing dairy farm is currently producing 10,000 gallons of milk per day. The government is considering two alternative policies. One is to give the farm a lump-sum subsidy of $500 per month. The other policy is to give the farm a subsidy of $0.05 per gallon of output. Which of the following statements is correct? (Hint: Think about how a firm in a competitive industry makes its output decision.)

a. Production at this farm will be increased if the per-unit subsidy is adopted but not if the lump sum subsidy is adopted.

b. Neither subsidy will affect production at this farm, since output is determined by profit maximization.

c. Both kinds of subsidy will increase production at this farm.

d. Which subsity has the greater effect on production at this farm depends on whether fixed costs are greater than variable costs.

3.Demand is given by p = 11- q and supply is given by p = 2 + 2q. Inititally the market is in equilibrium at (p,q) = (8,3). Then the government puts in place a price floor of $10. How large is excess supply at this price?