1. Draw the indifference curves that represent the following individual's preferences for peanut butter and jelly. Indicate the direction in which the individuals' utility is increasing.

a. Joe likes both peanut butter and jelly, and always gets the same additional satisfaction from an ounce of peanut butter as he does from 2 ounces of jelly.

b. Jane likes peanut butter, but neither likes nor dislikes jelly

c. bob likes peanut butter, but dislikes jelly.

d. Molly likes peanut butter and jelly, but she only wants 2 ounces of peanut butter for every ounce of jelly.

e. Bill has convex indifference curves and likes both peanut butter and jelly.

2. A monopolist has two plants, for which marginal costs are MC1= 20+2Q1 and MC2= 10+5Q2, where MC1 and MC2 are the marginal costs in plants 1 and 2, and Q1 and Q2 are the levels of output in each plant, respectively. The firm faces the following demand curve P=120-5Q, where Q=Q1+Q2.

a. Calculate the values of Q1,Q2,Q and P that maximize profit

b. calculate the producer and consumer surplus.

c. Calculate the lerner index of monopoly power