1. Preferences Suppose water is sold at a store. They come in either a gallon or a quart. There are four quarts in a gallon, and you only care about the amount of water.
   1. Draw three indifference curves for this situation, clearly labeling the bundle values (1, 2) on at least three points.
2. Utility Suppose you are food shopping for the week's lunches at a grocery store. You can either buy sandwiches (1), which one would be filling enough for a meal, or a salad (2) that you would need two of per meal. You don't have particular taste preferences between the two and just care about having a complete meal.

a. Create/specify a utility function for the problem above.

b. Suppose you had the two bundles (1, 2) = (2, 5) and (4, 2). Which would you prefer? Why?

• Suppose your friend wins a contest. She is given the following possibilities for prizes:

i. $100 and three toys

ii. $200 and two toys

iii. $300 and one toy

b. She prefers option (i) over option (ii), and option (ii) over option (iii). Name one addition preference relation that definitely cannot be true if the above two are true, and explain why.

• Suppose you had the utility function:

1 3

(1, 2) = 1 4 2 4

1. Find the marginal rate of substitution
2. Come up with another utility function that would have the same preferences as above.