Midterm 1 Answers

Midterm 1 Answers - 1. (5 What are the three Accioms of...

Info iconThis preview shows pages 1–5. Sign up to view the full content.

View Full Document Right Arrow Icon
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Background image of page 2
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Background image of page 4
Background image of page 5
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: 1. (5 What are the three Accioms of Choice? State each with a one line definition. iii/ht” 2. (5 mm) Sarah is very particular. She only consumes a mooseburger, 231, if it has exactly 3 pickles, mg, on it. Otherwise she has no use for mooseburgers or pickels. Draw Sarah’s indifference curve for mooseburgers and pickles that goes through the point (£61,332) — (5, 6). 3. (5 Joe is not always well—behaved, and can sometimes over—do it. Suppose his indifference curves for $1 and £132 are actually circles, with a center at ($1, 332) = (8, 6). In fact, ($1, 1:2) 2 (8, 6) is the happiest he can bewthe farther away from this point the worse off he is. Are Joe’s preferences convex? Are they monotonic? Explain. [Ismail], 3 Amwer shape flack/(LL, gomc 6(7me7‘; 5%; 041/5,” 5 arc flan “(W/7W“, ’1‘ 7C3} 1 f9”; W, I‘iflflf¥fii6fi(e 0W“; we; (iii/07¢ i3 fr? (“fl/1‘ 0 77,73 "Lo/firvr/ZM " m («vi/:qu Monv'i‘bmuia fwd/iii); “"5 V‘V/‘W” W9" 5 7Lu Show #3 <; S Infam- : Below [a [@715 ill/Meagan? 7m": "I 160% A” ell/fa) ft i i; /S’ 3, 7’, W; or (Airy/f 7% '( #70 Me F I by?“ A9" (3/4/44 ) mfléf Ive €966 K % 4. (5 When John was asked about his preferences, one time he said his utility function was u(:1:1, 11:2) : 13%;)33 + 100, but at another time he said his utility function was 2 r 3 5 . . . . . . . u(;r:1, :52) = 001/ 0m2/ . Is John being erratic, or is he givmg cons1stent answers? Explam. 716% “’7”? MM”; rffrfsénf 5m. f/tflronuj) as am M a Mia“ ‘fiwrfim‘a'fim % a 9‘ Z 3 M, 2.; f ‘5” / x, X: +/crv v (ya/XX) via/r0 5. (5 When Barack needs a quick snack he doesn’t care whether he gets 1 Kit—Kat, $1, or 2 Starburst, $2. That is, the extra utility he gets from 1 unit of 331 is the same utility he gets from 2 units of 202. Write down a utility function that would describe Barack’s preferences for these two goods. (You can sketch out an indifference curve first if that helps.) 6. ( 5 Define in words the term marginal utility. If Colin Powel is choosing between two goods, 0 and M7 and has utility u(:co,:1: M) = 51:055 M — 30M, What is his marginal utility for O, NIUO, and for M, MUM? {Hawaii/1d i: #1:: \ 1‘ a (4 (its 35mm sq (AQQ 9. (15 mm) Michelle consumes iTunes songs, good 3:1, and Green Machine Super Food Juice, good 1132. The prices are p1 = 1 and p2 = 3. Michelle has money m : 30. Answer the questions below, drawing and labelling the graphs very carefully. Be sure to leave space for all 4 answers. a) Draw Michelle’s budget constraint. b) Michelle’s brother just gave Michelle an iTunes gift certificate worth $15 on iTunes. Draw Michelle’s new budget constraint, assuming she uses the gift certificate. c) Michelle just discovered that she can sell her $15 iTunes gift certificate on eBay for $12 (no shipping fee—it’s an electronic gift certificate!). What would her budget constraint be if she sold the gift certificate? (1) Combine your answers to the last two questions to get Michelle’s budget constraint that includes the option to either use or sell her gift certificate. Draw an indifference curve for Michelle (with well—behaved preferences) that would imply she would choose to sell the gift certificate. 10. (10 mm) Cindy has the utility function u(m1, m2) : 3315102 and the budget constraint p174 +p2$2 = m. Use the Lagrangian method to set up and solve for the demand functions for both 371 and 5152. Be careful to show all your work. P‘X‘ + X‘P‘ : M I "— 7 © ‘0 a ‘ \ P 3 MA) luck IF}. x1 *5 Xz-x: ‘5» X : 1!}, fl _. M a (as?pr " 35; @ one Mr b.23le- C.M+m.',.+ m2; M'H e “1.1, a‘l' (Xx kW). 2 \I 'L ' P‘(%)+?2(%§D: m 6 N\:N\ ...
View Full Document

Page1 / 5

Midterm 1 Answers - 1. (5 What are the three Accioms of...

This preview shows document pages 1 - 5. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online