Donald derives utility from only two goods, carrots (X) and donuts (Y). His utility function is as follows: U(X, Y) = XY. Donald has an income (M) of $120 and the price of carrots (PX) and donuts (PY) are both $1.

a) Find the marginal utility that Donald receives from carrots (MUX) and from donuts(MUY) (4marks)

b) Determine the marginal rate of substitution of X for Y (MRSXY)(4 marks)

c) How does MRSXY change as the firm uses more X, holding utility constant.(3 marks)

d) What is Donald's budget line and relative price (PX/ PY )(4 marks)

e) What quantities of carrots and donuts will maximize Donald's utility? (5 marks)