Question: Crystal s utility function is given by U ( B , C ) = B * C , where B is the number of burgers

Crystals utility function is given by U(B,C)=B*C, where B is the number of burgers per
week and C is the number of packs of cigarettes per week. Thus, MUB=C and MUC=B.
a. What is the equation for the marginal rate of substitution?
b. If her income is $240 per week, and prices are PB=8 and PC=4, how many burgers and
packs of cigarettes does she purchase to maximize her utility?
c. The government wants to cut down the consumption of one these items ... so it taxes
burgers, which increases PB to $12. Now what are the optimal choices of B and C for
Crystal?
d. On the same graph, illustrate your answers to parts (b) and (c)

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