Question: 1. A consumer spends all her income of £120 on the two goods A and B. Good A costs £10 a unit and good B costs £15. What combination of A and B will she purchase if her utility function is U = 4A0.5B0.5?
2. If a firm faces the production function Q = 4K0.5L0.5, what is the maximum output it can produce for a budget of £200? The prices of K and L are given as £4 per unit and £2 per unit respectively.