Suppose the person faced with the budget constraint described in problem 2.1 has preferences for apples (A) and bananas (B) given by

Utility = √A∙B

a. If A = 5 and B = 80, what will utility be?

b. If A = 10, what value for B will provide the same utility as in part a?

c. If A = 20, what value for B will provide the same utility as in parts a and b?

d. Graph the indifference curve implied by parts a through c.

e. Given the budget constraint from problem, which of the points identified in parts a through c can be bought by this person?

f. Show through some examples that every other way of allocating income provides less utility than does the point identified in part b. Graph this utility-maximizing situation.