Carol likes to have bagels (B) and cream cheese (C) for breakfast every morning. For every two bags of bagel, she eats one box of cream cheese. So she views two bags of bagel as a perfect complement to one box of cream cheese. The price of a bag of bagel is $5 and the price of one box of cream cheese is $4. Her budget on breakfast this month is $28.

(a)Write down a utility function that represents Carol's preferences over(bags of) bagels (B) and (boxes of) cream cheese (C).

(b)How many bags of bagels (B) and boxes of cream cheese (C) is she going to consume?

(Hint: the first order conditions will not help; draw the budget constraint and the indifference curves and look at the highest one that has a point in common with the budget constraint).

(c)What is the exact value of Carol's indirect utility?