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1. Theo spends his income on donuts (D) and coffee (C). Coffee is $2 per cup and donuts are $1 each. Assume that Theo has
1. Theo spends his income on donuts (D) and coffee (C). Coffee is $2 per cup and donuts are $1 each. Assume that Theo has $10 to spend, and his utility function is given by U(D, C) = 130-5005. For this utility function, MUD = 050-05005 and MUG = 0.500-50-0-5. a. What is the optimal number of donuts and coffee for Theo to purchase? (75 points) b. How much utility (measured in utils) does this optimal combination of donuts and coffee give Theo? (25 points)
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