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l. (a) Utility maximization is achieved when the budget is allocated so that the marginal utility per euro of expenditure is the same for each good. Explain this statement. A consumer has є100 of income to allocate between bread and pizzas. Bread costs €1 per loaf. (b) Suppose when pizza costs €5 per unit, the consumer chooses 10 pizzas. Draw the budget constraint and the indifference curve to represent this budget and choice. Be specific about where the budget line crosses the X and Y axis. Suppose the pizza company now introduces a quantity discount whereby a consumer receives a discount for any pizzas bought in excess of 10. So the price is still є5 each for the first 10 pizzas but only €2 each for any additional pizza (in excess of 10). Draw the budget constraint hthis quantity discount. Will the consumers optimal choice now change? Explain. (c)

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