The government of the island nation of Autarka has become increasingly concerned about the health and wellbeing of low income households. Medical experts stress the importance of a healthy diet in this regard. They have determined that, ideally, a household would consume at least 10kg of fresh fruit and vegetables each week.

The government has proposed implementing a new voucher scheme to ensure that the 10kg per week consumption target is met. Under the government's proposal, the vouchers would be redeemable for fresh fruit and vegetables, but could not be used for other types of food, or for non-food consumption. Moreover, to limit the cost of the voucher scheme, the value of the vouchers sent to a household would be linked to the household's income.

Community groups in Autarka have expressed concern that a voucher scheme is unnecessarily paternalistic; depriving low income households of the choice of how to spend their income. These groups argue that the government's consumption targets could be met just as well using transfers (monetary payments from the government to the low income households). Transfers, they argue, would empower low income households to make their own consumption decisions.

2.1 Your task

Your task is to determine the optimal voucher value as a function of household income. The voucher must implement the government's target of 10kg of fresh fruit and vegetables consumed per week, while minimizing the cost of the vouchers to the government. You are also to assess the community groups' claim that a transfer scheme would implement the government's targets just as well. Do you think that the community groups are motivated by the health outcomes associated with a good diet? Or might they have another objective?

2.2 Household preferences

Using data from household surveys, you have determined that the 'typical' household's preferences are represented by the utility function,

U = (x + 36)y ,

where x represents the quantity of fruit and vegetables consumed, and y represents the

quantity of the composite good consumed. The associate marginal utilities are, MUx=y and MUy=x+36.

The price of fruit and vegetables is Px = $12 per kg, and the price of the composite good is normalized to Py = 1.

question:

Step 1: Derive the marginal rate of substitution for the typical household. (4 marks)

Step 2: Find the household's demands for 'fruit and vegetables', and for the composite good, as functions of the household's weekly income I. Hint: There is a critical income level below which the household's optimal consumption basket is a corner solution. (23 marks)

Step 3: What is the lowest level of income at which a household's consumption of fruit and vegetables will meet the Government's target? (5 marks)

Step 4: Suppose that the government decides to implement its target consumption of fruit and vegetables using transfers. How much would the government need to transfer to a household each week to achieve the 10kg consumption target? Hint: Your answer will be a function of the household's income I. You should assume that transfers cannot be negative. (4 marks)

Step 5: Suppose that, instead of transfers, the government decides to use vouchers redeemable for fruit and vegetables. What value of voucher would the government need in order to achieve the 10kg consumption target? Hint: Your answer will be a function of the household's income I. You should assume that vouchers cannot have a negative value. (14 marks)

Accounting 101 - Exam #2 (Chapters 3&4) 22. Determine the current assets. a. $23,030 b. $9,330 c. $21,930 d. $8.630 23. Determine the total liabilities for the period. a. $1,900 b. $6,200 c. $4,300 d. $20,240 24. There are four closing entries. The first one is to close revenues, the second one is to close expenses, the third one is to close , and the last one is to close the a. Income Summary, drawing account b. Income Summary, capital account c. Income Summary, assets d. drawing account; Income Summary 25. Which of the accounts below would be closed by posting a debit to the account? a. Unearned Revenue b. Fees Earned c. Josh Morton, Drawing d. Miscellaneous Expense Part II Id be reported in the section of financial statements identified as (a) currentQUESTION 13 A list of all accounts and their balances after posting closing entries is referred to as: O A trial balance. O An adjusted trial balance. O A post-closing trial balance. An accounting trial balance. QUESTION 14 A list of all accounts and their balances after updating account balances for adjusting entries is referred to as: O A trial balance. O An adjusted trial balance. O A post-closing trial balance. O An accounting trial balance. QUESTION 15 A post-closing trial balance: Is a list of all accounts and their balances after adjusting entries. Is a list of all accounts and their balances before adjusting entries. Is a list of all accounts and their balances after closing entries. O Is a trial balance adjusted for cash-basis accounting.Question 1 The Unadjusted Trial Balance columns of a work sheet total $84,000. The adjusted trial balance reflects adjusting entries for the following: i. Office supplies used during the period, $1,200. ii Expiration of prepaid rent, $700. Ill. Accrued salaries expense, $500. iv. Depreciation expense, $800. v. Accrued service fees receivable, $400, (T or F) The column total for the adjusted trial balance must be $85,700, True FalsePosting Summary Trial Balance Question 11 (1 point) Which of the following statements is false Total debits equals total credits on the Trial Balance Every journal entry must balance Total Credits > Total Debits means the company is profitable Question 12 (1 point)