Your answers to each of the 5 questions should be written LEGIBLY and scanned (or typed). PDF file must be uploaded to Canvas 1. Arthur spends his income on bread and chocolate. He views chocolate as a good but is neutral about bread, in that he does not care if he consumes it or not. Draw Arthur's indifference-curve map. 2. Tiffany purchases only two goods, apples (qi) and kumquats (92). She has an income of $40 and can buy apples at $2 per pound and kumquats at $4 per pound. Her preferences are represented by the linear utility function U(q1, q2) = 3q1 + 5q2. What is her marginal utility of apples? What is her marginal utility of kumquats? Draw Tiffany's budget constraint. Show that Tiffany's marginal rate of substitution constant, and therefore her indifference curves are linear. What is Tiffany's optimal consumption bundle in terms of pounds of apples and pounds of kumquats? 3. Bob consumes two goods, q and q2. His utility function is give by U(q1, 92) = 291 42 Market prices are p1 = 3 and p2 = 2; and Bob's income is 100. (a) Draw Bob's budget constraint indicating the slope and intercept values (where you plot q1 on the horizontal axis). Draw an indifference curve that is tangent to Bob's budget constraint at an interior solution. (b) Find Bob's optimal consumption choice using the substitution method outlined in class (show your work!) (c) Assume that inflation increases the prices of each good by 100%, but Bob's income also increases by 100%. Use the Lagrangian method to show that this type of neutral inflation has no effect on Bob's optimal consumption bundle. [Vacuous answers like, "Inflation has no effect on Bob's consumption quantities," earn you zero credit].4. Vasco likes spare ribs, q1, and fried chicken, q2. His utility function is U = 10q192. His weekly income is $90, which is spends on ribs and chicken only. (a) If he pays $10 for a slab of ribs and $5 for a chicken, what is his optimal con- sumption bundle? Show his budget line, indifference curve, and optimal bundle, C1, in a diagram. (b) Suppose the price of chicken doubles to $10. How does Vasco's optimal consump- tion of ribs and chicken change? Show his new budget line and optimal bundle, 2, in your diagram. 5. Consider a consumer with the following utility function U(91, 92) = q1. 9.5 + q2 . The consumer maximizes utility given the parameters p, =(price of good 1), p2 =(price of good 2), and Y =income. (a) Find the optimal consumption of goods 1 and 2 as a function of the parameters (P1, p2, and Y). (b) In the expenditure-minimization problem outlined in class the dual problem pa- rameters are p1, p2, and U. Find the expenditure function in terms of the dual parameters. That is find: E(P. P2, U) = ming,$2 {Pig + P292 : U = qp5+ q25 [Hint: See solved problem 3.8 in your textbook]