transportation costs, which include both subway rides and other types of transportation (such as cabs, rideshares, and buses). The price of a subway ride is $2.75 per ride. a) Placing the number of subway rides on the x-axis and expenditure on other types of transportation on the y-axis illustrate Gotham's budget set. What is the opportunity cost of an additional subway ride in terms of other types of transportation? b) If Gotham chooses to take 10 subway rides per month, then how much can he spend on other types of transportation? Suppose that his MRSX,Y at this basket is 8.25; then, is this the best basket on his budget line? If it is not his best basket, should he consume more or fewer subway rides? You may use a diagram to illustrate your answer. The New York City Council would like to increase the weekend ridership of the subway system. One proposal is to lower the fare for riders to $2.5. In order to do so the City Council promises to reimburse the Metropolitan Transit Authority (MTA) $.25 for each of the reduced fare rides (so the MTA still receives $2.75 per ride). c) In a new diagram illustrate the effect of the reduced fare program on Gotham's budget line. Include in your diagram the original budget line. What is the new opportunity cost of subway rides in terms of other types of transportation? Write the equation for Gotham's budget line after the fare reduction. d) Suppose that Gotham's MRSX,Y is given by MRSX,Y=xy. Show that Gotham will choose to ride the subway 22 times in the month when subway rides cost $2.5. How much does he spend on other types of transportation? What is the numerical value of the cost to the City Council? Illustrate your answer on the diagram of part d and indicate on the diagram the cost to the City Council. transportation costs, which include both subway rides and other types of transportation (such as cabs, rideshares, and buses). The price of a subway ride is $2.75 per ride. a) Placing the number of subway rides on the x-axis and expenditure on other types of transportation on the y-axis illustrate Gotham's budget set. What is the opportunity cost of an additional subway ride in terms of other types of transportation? b) If Gotham chooses to take 10 subway rides per month, then how much can he spend on other types of transportation? Suppose that his MRSX,Y at this basket is 8.25; then, is this the best basket on his budget line? If it is not his best basket, should he consume more or fewer subway rides? You may use a diagram to illustrate your answer. The New York City Council would like to increase the weekend ridership of the subway system. One proposal is to lower the fare for riders to $2.5. In order to do so the City Council promises to reimburse the Metropolitan Transit Authority (MTA) $.25 for each of the reduced fare rides (so the MTA still receives $2.75 per ride). c) In a new diagram illustrate the effect of the reduced fare program on Gotham's budget line. Include in your diagram the original budget line. What is the new opportunity cost of subway rides in terms of other types of transportation? Write the equation for Gotham's budget line after the fare reduction. d) Suppose that Gotham's MRSX,Y is given by MRSX,Y=xy. Show that Gotham will choose to ride the subway 22 times in the month when subway rides cost $2.5. How much does he spend on other types of transportation? What is the numerical value of the cost to the City Council? Illustrate your answer on the diagram of part d and indicate on the diagram the cost to the City Council
