Question 3 i. The marginal utility for shoes and coffee is given below for five individuals. A pair of shoes costs $2, and a cup of coffee costs $1. Marginal Utility of Marginal Utility of Shoes Coffee Michelle Renee Douglas Paul Shannon a. Which of these consumers are optimizing over their choices? Explain b. For those who are not, how should they adjust their spending? Explain ii. \"Pasta is Miguel's favorite meal therefore the law of diminishing marginal utility does not apply\". Do you agree with this statement? iii. Itis known that the indifference curve is convex. What does this tell you about the relationship between the goods? iv. The income effect and the substitution effect work in the same direction for a normal good. Explain how this differs for an inferior good Question 4 i. Are the following statements true or false? Explain your reasons. a. For a firm with price in excess of average total cost, the presence of economic profits implies that the firm should increase output in the short run even if price is below marginal cost. b. If marginal cost is rising with increasing output, average cost must also be rising * c. Fixed cost 1s the same at each output level except when no output is produced. When a firm produces no output, there are no fixed costs. ii. Allsmart's demand curve is given by Q=10-P for its dishwashers. The marginal and average cost is $3 per dishwasher produced. Complete the following table