US213 - Exam 1 [45 points] Vika is a Ukrainian person who has 4,000 hryvnia (UAH) per week to spend on firewood and other goods during the winter of 2023. Suppose that the price of one cubic foot of firewood is 200 UAH and the price of one unit of other goods is 1 UAH. Hence, the quantity of other goods that she purchases is equal to her expenditure on other goods. a. (5 points) Illustrate Vika's budget constraint (make it really large) by placing firewood on the x- axis and other goods on the y-axis. Include the numerical value of the maximum amount of firewood and expenditure on other goods that Vika can afford. b. (5 points) What is the opportunity cost of firewood in terms of other goods in words? How do we measure this opportunity cost numerically? c. (5 points) If Vika purchased 10 cubic feet of firewood, how many units of other goods could she afford? d. (5 points) Could Vika find it optimal to purchase i) 10 cubic feet of firewood and ii) spend 1,000 UAH on other goods? Clearly explain. (5 points) If the numerical value of Vika's MRSFirewood, Other Goods at the basket of part c. were equal to 200, would Vika optimally choose to consume this bundle? Explain why or why not, and illustrate Vika's choice on the graph of part a. Make sure to include Vika's indifference curve. It turns out that Vika is not allowed to purchase more than $ cubic feet of firewood per week because the Ukrainian government has rationed the consumption of firewood. f. (5 points) Illustrate Vika's constraint and Vika's choice under the rationing scenario on the graph that you used in part a. Make sure to include her new indifference curve. Will the rationing make Vika better off or worse off? Explain. The government is considering discontinuing the rationing of 3 cubic feet of firewood per week by letting consumers purchase un unrestricted amount of firewood at a higher equilibrium price. g. (5 points) Could the elimination of the rationing make Vika better off even if the price of firewood increased? Explain and illustrate your answer on the graph of part a. Oleg is a low-income individual who earns 1,000 UAH per week and chooses to purchase 3 cubic feet of firewood per week when the price of firewood is 200 UAH. h. (5 points) Would the elimination of the firewood rationing of 3 cubic feet per week (and resulting increase in the firewood price) make Oleg better off or worse off? Explain. i. (5 points) Under what circumstances (except for having a different income) would Oleg respond to the resulting increase in the firewood price by increasing their consumption of firewood? Clearly explain