1. How has inequality of wealth and income changed in the past fifty years? Why would this occurrence lead to economists becoming concerned? That is, why is inequality considered to be a market failure? How should the government mitigate this market failure?

1. Fill in the following table, graph marginal and total utility of cookies and the total and marginal utility of cupcakes and answer the following questions:

Table 1: Consumer maximization

Quantity Of cupcakes	Total Utility Of cupcakes	Marginal Utility of cupcakes	Number of slices of cookies	Total utility of cookies	Marginal utility of cookies
0	0	--------	0	0	---------
1		9	1	20
2	17		2	36
3	24		3	48
4		6	4		8
5		5	5		4
6		4	6		0

1. If you have a budget of $6 and the cookies cost $ 2 and cupcakes cost $1 each, what is the consumer optimum?
2. What if your budget increases to $11, what is your consumer optimum?
3. Do you think consumers actually act in this way when determining how to choose between goods? Why or why not? Explain.

1. Explain and give examples of the adverse selection, moral hazard, and principal-agent problems. Why are these issues important when we discuss health care?

1. How does the Law of Comparative advantage lead to trade efficiencies? What reasons might a nation have to enact trade barriers? What is the impact of trade barriers?

1. Suppose that when Japan puts all of its resources into the production of textiles it can produce 250,000 units of textiles and if it puts all of its resources into furniture it can produce 500,000 units of furniture. If Vietnam puts all of its resources into textiles it can produce 60,000 units of textiles and if it puts all of its resources into the production of furniture it can produce 30,000 units of furniture. Draw the Production Possibilities curve for each country and answer the following questions.

1. What is the opportunity cost of one unit of textile and one unit of furniture for each country?
2. Which country has the absolute advantage to produce textiles? Which country has the absolute advantage to produce and furniture?
3. Which country has the comparative advantage to produce textiles? Which country has the comparative advantage to produce and furniture?