Consider the utility function U = ln(M ) + ln(S) where M is the level of medical care, and S is spending on all other goods. Suppose medical care is priced at $200-per-unit of medical care, income is $20,000, and let PS = $1. 1. Write the budget constraint. 2. Sketch the budget constraint where M is on the horizontal axis. 3. Let M UM = 1/M and M US = 1/S. Use the rational spending rule to find the optimal level of medical care and generalized spending. 4. Suppose price of medical care decreases by $100-per-unit of medical care, sketch the new budget constraint on the same graph as Exercise 2.2. 5. Suppose the government established a new policy for all individuals making less than $30,000. The new policy will pay for the first $2,000 of medical care for these individuals each year. How does this affect the person's budget constraint and optimal market basket?