1. Tina hires leff to do odd jobs around her horne and agrees to pay him $5 per hour' Tina further agrees to guarantee Jeff at least 40 hours of work per week' and to pay him l,5 times his base pay for any hourswor kedbeyond 40. If Jeff works 45hours this week,are his wages a fixed cost or a variable cost toTina? Explain.
2. Imagine that you're on vacation in Russia, when suddenly you're arrested and accused of spying for the United states. (You',re innocent, of course') Your captors inform you that if you confess, you'll receive a prison sentence of two years/ while your co-conspirator (whom you've never heard of) will receive a prison sentence of twenty years. If you both confess, you'll each receive a prison sentence of five years' You're also told that your co-conspirator is being offered the same option' if you both maintain your innocence, howevel there's not enough evidence to convict either of you' Applying economic theories to the problem, what should you choose to do, and why?
3. A hotel owner, having heard that new hotels plan to open in his area, says, "we have too many hotels in this town already. Statistics show that vacancy rates average 20 percent on any given night." Assuming this is correct, evaluate his negative assessment of the situation in terms of business-stealing and product-variety externalities.