Question 2. Chapter 2, Profit maximization in the case of perfect substitutes.

Ms. Caffeine enjoys coffee ( C ) and tea (T) according to the function U(C,T)=3C + 4T.

a.(10 pt.)What does her utility function say about her MRS of coffee and tea? What do their indifference curves look like? (Please plot C in the x-axis and T in the y-axis.)

b.(10 pt.)If coffee and tea cost $3 each and Ms. Caffeine has $12 to spend on these products, how much coffee and tea should she buy to maximize her utility?

c.(10 pt.)Draw the graph of her indifference curve map and her budget constraint, and show the utility-maximizing point. Please label all elements of the graph carefully.

d.(10 pt.)Would this person buy any coffee if she had more money to spend?

e.(10 pt.)How would her consumption change if the price of coffee fell to $2?