Question: | 12. [15 pts] Maeby has $60 to spend between movies and clothing. The price of movies is $5 and the price of clothing

| 12. [15 pts] Maeby has $60 to spend between movies and

| 12. [15 pts] Maeby has $60 to spend between movies and clothing. The price of movies is $5 and the price of clothing is $2. Suppose Mary's utility function is given by the equation U = XY, where U is the level of utility measured in utils and X and Y refer to movies and clothing respectively. The marginal utility of movies can be expressed as MUx= Y; and the marginal utility of clothing can be expressed as MUy=X. a) Graph Maeby's budget line. b) Solve for the utility maximizing bundle which Maeby should choose. What is her utility from choosing this bundle? c) Would Maeby prefer that the price of movies decreases to $2 or the price of clothing decreases to $1. Explain.

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