Problem 1 Text: A family has to decide how much of his monthly income to spend on Good 1 and Good 2. Suppose that this household has a fixed income of $600 per month. Further, suppose that the price of Good 1 is p;=$2 and the price of good 2 is p2=$1. Finally, suppose that the tastes of the households are described by utility function u(x, , X2 ) = x, x2 4, where x, denotes the quantity of Good 1 and X2 the quantity of Good 2. Questions: 1. In a graph with Good 1 on the horizontal axis and Good 2 on the vertical axis, what is the vertical intercept of the budget constraint? 2. In a graph with Good 1 on the horizontal axis and Good 2 on the vertical axis, what is the horizontal intercept of the budget constraint? 3. What is the opportunity cost of Good 1? (Enter a positive number) 4. Do indifference curves of the household intersect the axis? a. Yes, they intersect both axes b. No, they do not intersect the axes c. They intersect only the vertical axis d. They intersect only the horizontal axis 5. Do indifference curves of the household satisfy the 5 standard assumptions about tastes? a. Yes, but only the weak version of monotonicity and convexity b. Yes, including the strong version of monotonicity and convexity c. No, they do not satisfy all 5 assumptions d. There is not enough information to answer 6. What is the optimal quantity of Good 1 purchased by the household? 7. What is the optimal quantity of good 2 purchased by the household