practiceexam3-fall07

practiceexam3-fall07 - ,0,0 Cornell University Department...

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,0 ,0 Cornell University Department of Economics Ani Guerdjikova Assistant Professor ECON 313 Intermediate Microeconomics Final Exam Fall 2006 Duration: 2 1 2 hours General Instructions: 1. This is a closed book exam. 2. The exam consists of four problems. Please answer all questions from all problems. 3. Each problem is worth 100 points. 5. Please answer each problem in a separate blue book. Indicate clearly which problem and which part you are working on. and provide a consistent answer.
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Problem 1 Pit eats only hotdogs with ketchup. His preferences are given by the utility function: u ( x h ; x k ) = min f x h ; 5 x k g , where x h is the amount of hotdogs and x k , the amount of ketchup he consumes. The price of ketchup is p k p h . This week, Pit has planned to spend y dollars on hotdogs and ketchup . a) Derive Pit’s marginal rate of substitution between hotdogs and ketchup whenever possible. Draw several of his indifference curves in a graph. Derive his budget con- straint and draw it into your graph. b) in an optimum. Illustrate Pit’s optimal decision in a graph. Derive Pit’s demand for
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practiceexam3-fall07 - ,0,0 Cornell University Department...

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