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Unformatted text preview: Econ 11 Summer Session C 2007 Instructor: Viola Chen Last Updated: 8/9/2007 Page 1 of 15 S UGGESTED S OLUTIONS 1 Partial Equilibrium Model 1.) Textbook 10.4 a) P*=10, Q*=80 b) 74 13 9 = = = Q P P D S Tax burden: The consumers pay $3 out of the $4 tax for each Frisbee and the producers pay $1 out of the $4 tax for each Frisbee. The tax burden is shared, but the consumers pay relatively more than the producers. c) P*10, Q*=80 After the tax: 3 . 77 3 . 11 3 . 7 = = = Q P P D S In this case, the tax burden is still shared, but the producers pay relatively more of the tax. 2.) Textbook 11.1 Econ 11 Summer Session C 2007 Instructor: Viola Chen Last Updated: 8/9/2007 Page 2 of 15 3.) Textbook 11.4 4.) Textbook 11.5 Econ 11 Summer Session C 2007 Instructor: Viola Chen Last Updated: 8/9/2007 Page 3 of 15 Econ 11 Summer Session C 2007 Instructor: Viola Chen Last Updated: 8/9/2007 Page 4 of 15 Math Review 1.) 2 / 1 2 / 1 2 / 1 2 / 1 2 1 2 1 = = y x y f y x x f 2.) ) 3 ( ) 4 3 ( 3 ) 8 3 ( ) 4 3 ( 3 2 2 2 2 x x xy y f x y x xy x f = = 3.) x y f x y x f ln = = 4.) xyz xyz e xz y f e yz x f ) ( ) ( = = Econ 11 Summer Session C 2007 Instructor: Viola Chen Last Updated: 8/9/2007 Page 5 of 15 5.) 2 2 2 ) ( ) ( ) ( ) ( y x x y f y x y y x x y x x f + = + = + + = Preferences & Utility 1) Textbook problem 3.3. a.) x y MRS = As x increases, the MRS decreases. Hence, we have diminishing MRS. y MU x = The MU of x stays constant as x increases, because here we treat y as a constant. Hence, constant MU. x MU y = The MU of y stays constant as y increases, because here we treat x as a constant. Hence, constant MU. b.) x y MRS = As x increases, the MRS decreases. Hence, we have diminishing MRS. 2 2 xy MU x = The MU of x increases as x increases Hence, increasing MU. 2 2 yx MU y = The MU of y increases as y increases. Hence, increasing MU. c.) x y MRS = As x increases, the MRS decreases. Hence, we have diminishing MRS. x MU x 1 = The MU of x decreases as x increases. Hence, decreasing MU. y MU y 1 = The MU of y decreases as y increases. Hence, decreasing MU. We can conclude that monotonic transformations affect the MU, but does not affect the MRS. 2) Textbook problem 3.5 a, b, c Econ 11 Summer Session C 2007 Instructor: Viola Chen Last Updated: 8/9/2007 Page 6 of 15 a.) ) 5 . , , 2 , min( ) , , , ( r m b h r m b h U = b.) A fully condimented hot dog....
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This note was uploaded on 03/06/2008 for the course ECON 11 taught by Professor Cunningham during the Summer '08 term at UCLA.
 Summer '08
 cunningham
 Microeconomics

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