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1. Sara likes to Play-station games (P) and Cinema (C). The cost of Play-Station games is birr 2 and that of Cinema is birr 4.

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1. Sara likes to Play-station games (P) and Cinema (C). The cost of Play-Station games is birr 2 and that of Cinema is birr 4. Sara's monthly budget for these item is birr 100 and her utility function is U(P,C)= P C+2. Then calculate A. Utility maximizing units of Play-station and Cinema(2 pts) B. Marginal utility of money and interpret it. (1 pt) C. MRS,cat optimum point and interpret the result(1 pt) 2. Cobb-Douglas utility function for two commodities is U=X-Y and the price of x and y are Px and Py respectively. M is money income of the consumer. Then show that the optimal demand for commodity X and Y. Show each steps briefly 3. Suppose a production function of a firm is given by; , find the labor employment levels a) At the point of diminishing marginal productivity of labor. b) At the point of diminishing average productivity of labor. c) Find the labor employment corresponding to the three stages of production (use appropriate graph) 4. Assume a hypothetical consumer consumes good X and good Y. The price of good X is 1 and price of good Y is 3 and the consumer budget is birr 10 for the two goods. Where: Q is quantity of good X Q, is quantity of good Y and TU, and TU, is total utility from consuming good X and good Y respectively. TU TU 0 0 10 24 19 45 27 63 34 78 40 87 44 90 Based on the given information answer the following questions. A. Compute the marginal utility of the two goods

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