II. Questions (20 points) 1. (10%) Define the following costs and give an example for each cost: opportunity cost, sunk cost, implicit cost, explicit cost, long-run cost, and short-run cost.

III. Problem (20 points) 1. (10%) Assume that there are n goods in an economy. A consumer with income Y will consume each good and exhaust his entire budget. Let be the income elasticity of good i and ki represent the fraction of the consumer’s budget spent on good i. Please show that