Astudent consumes root beer and a composite good whose price is $1. currently, the government im- poses an excise tax of $0.50 per six-pack of root beer. the student now purchases 20 six-packs of root beer per month. (think of the excise tax as increasing the price of root beer by $0.50 per six-pack over what the price would be without the tax.) the government is considering elimi- nating the excise tax on root beer and, instead, requiring consumers to pay $10.00 per month as a lump-sum tax (i. e., the student pays a tax of $10.00 per month, regardless of how much root beer is consumed). if the new proposal is adopted, how will the student’s consumption pattern (in particular, the amount of root beer consumed) and welfare be affected? (assume that the student’s marginal rate of substitution of root beer for other goods is diminishing.)

Cadbury has a chocolate factory in dunedin, new zealand. for easter, it makes two kinds of “easter eggs”: milk chocolate and dark chocolate. it cycles between producing milk and dark chocolate eggs. the table below provides data on these two products. demand (lbs per hour) milk: 500 dark: 200 switchover time (minutes) milk: 60 dark: 30 production rate per hour milk: 800 dark: 800 for example, it takes 30 minutes to switch production from milk to dark chocolate. demand for milk chocolate is higher (500lbs per hour versus 200 lbs per hour), but the line produces them at the same rate (when operating): 800 lbs per hour. a : suppose cadbury produces 2,334lbs milk chocolate and 1,652 lbs of dark chocolate in each cycle. what would be the maximum inventory (lbs) of milk chocolate? b : how many lbs of milk and dark chocolate should be produced with each cycle so as to satisfy demand while minimizing inventory?