Question 7:

1) U(x1,x2) = (x1 - 1)^2 + (x2 1)^2

MUx1 = 2(x1 1)
MUx2 = 2(x2 1)
MRS = -MUx1/MUx2
Substituting from above:
MRS = -2(x1-1)/2(x2-1) = (1-x1)/(x2-1)
B: x1 + x2 <= 10
Therefore,
Optimum x1 = (1-x1)/(1-x1+x2-1)*10 =10(1-x1)/(x2-x1)
Optimum x2 = (x2-1)/(1-x1+x2-1)*10 =10(x2-1)/(x2-x1)
2) U(x1,x2) = -(x1 - 1)^2 - (x2 1)^2
MUx1 = -2(x1 1)
MUx2 = -2(x2 1)
MRS = -MUx1/MUx2
Substituting from above:
MRS = -2(x1-1)/2(x2-1) = (1-x1)/(x2-1)
B: x1 + x2 <= 10
Therefore,
Optimum x1 = (1-x1)/(1-x1+x2-1)*10 =10(1-x1)/(x2-x1)
Optimum x2 = (x2-1)/(1-x1+x2-1)*10 =10(x2-1)/(x2-x1)
3) U(x1,x2) = x1+x2
MUx1 = 1
MUx2 = 1
MRS = -MUx1/MUx2
Substituting from above:
MRS = 1
B : (x1 - 1)^2 + (x2 1)^2 <=1
Hence to solve this for optimal consumption bundle, we assumed both are
equal:
2*(x-1)^2 =1
X = ()^0.5 +1
Therefore,
Optimum x1 = ()^0.5 +1
Optimum x2 = ()^0.5 +1