Question 4 (Consumer Choice Theory) Assume an individual has the following Marginal Utilities Quantit MU MU X y 10 40 8 30 OUT A W N - K O 18 4 2 5 W a) Assume that the budget is $8, the Price of X is $1, and the Price of Y $1. How much X and Y will the consumer buy? b) Assume that the budget is $8, the Price of X is $1, and the Price of Y $2. How much X and Y will the consumer buy? c) Illustrate the solutions for a and b. d) What is the Law of Decreasing Marginal Utility? Hin Parge 172 e) What is the Optimal Purchasing Rule? (Sometimes known as the equation of exchange) Hint Page 182 Question 5 (Cost Curves - Short Run and Long Run) a) Draw the AFC, AVC, ATC, and MC cost curves. Briefly explain their shapes. Hint Page 236 b) Draw the Long Run Average Cost Curve. Briefly explain its shape. Hint Page 267. c) What is the difference between the Long Run and Short Run in the context of Microeconomics