3. (Courtesy of Professor Foster): Chief Wiggams has $6. Each doughnut costs $0.45 if bought

individually, but a half-dozen costs just $2 and a dozen costs $3. If he buys 1 doughnut, how

much money is left over? If he buys 2 doughnuts? 3? 4? etc. Graph the budget constraint for

doughnuts and money remaining (to buy other stuff), with doughnuts on the horizontal axis and

money remaining on the vertical. Label every economically meaningful point in the

diagram. What conclusions can we draw about the Chief's optimal choice? Are there rational

indifference curves that would lead him to buy 11 doughnuts?