1. Suppose that Jana cares only about apples and lettuce. Her utility function is U = A0.5L0.5, where A is the number of apples and L is the number of heads of lettuce that she consumes. The price of apples is $1, and the price of lettuce is $4. Suppose that Jana have $40 to spend.
a) Determine the maximum number of apples (A) and heads of lettuce (L) she can purchase if she only purchase apples or only purchases lettuce. 2 points
b) State Jana's budget constraint (line) in the format L= intercept - slope * A 1 point
c) Determine Jana's MRSAL (Apples for Lettuce) 1 point
d) Does Jana's utility function satisfy the rules "more is better" and "diminishing marginal utility"? Motivate your answers. 2 points
e) What is the optimal number of apples (A) and heads of lettuce (L) for Jana given her budget constraint? 2 points
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