A. A consumer has $360. Good X costs $4 each. Good Y costs $8 each. Draw the budget line. Label it “budget line A.” Pref

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A. A consumer has $360. Good X costs $4 each. Good Y costs $8each. Draw the budget line. Label it “budget line A.” Preferencesare perfect complements: utility = min{X,Y}. Both X and Y arenormal goods. Numerically solve the consumer’s budget choice. Labelit on the diagram, including the indifference curve, and all solvednumbers. B. A consumer has $400. Good X costs $6 each. Good Y costs$7 each. Draw a new budget line, on a new graph. Label it “budgetline B.” Once again, preferences are perfect complements: utility =min{X,Y}. Both are normal goods. Numerically solve the consumer’sbudget choice. Label it on the diagram, including the indifferencecurve, and all solved numbers. C. Herman Cain ran for president inthe year 2012. He made the following policy proposal: Reduce thefederal income tax, and make up the federal revenue shortfall witha new national sales tax charged, in addition to the state andlocal sales tax. Total federal tax revenue would be unchanged.Herman Cain stated that the average person would be better off. Usethe objective of the consumer (utility maximization, as illustratedin parts A and B) to explain and evaluate if Herman Cain was rightor wrong.