hw1 - Homework#1 due August 8 at noon to Bunche 9372 Econ...

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Homework #1 due August 8 at noon to Bunche 9372 University of California, Los Angeles Each question is worth 4 points, for a total of 20 points. 1. True or False? Why? (a) The economic cost of a vacation is the cost of airfare, food, car rental and hotel. (b) If an actress (who only cares about acting) has convex preferences over stage and screen performances, she will prefer to take roles both on Broadway and in the movies rather than sign an exclusive contract with Paramount pictures. (c) A student (with preferences that satisfy the axioms of rational choice) is equally well o/ if he receives \$100 in cash each month from his parents as if his parents subsidize his rent by \$100 per month. ( Hint: draw his budget constraint. ) (d) Suppose ( x 1 ;y 1 ) is preferred to ( x 2 ;y 2 ) if x 1 > x 2 or if x 1 = x 2 then if y 1 > y 2 . These are called lexicographic preferences. Lexicographic preferences satisfy all the axioms of rational choice. 2. De±ne the utility functions and draw the indi/erence curves for each of

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This note was uploaded on 09/23/2008 for the course ECON 11 taught by Professor Cunningham during the Summer '08 term at UCLA.

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hw1 - Homework#1 due August 8 at noon to Bunche 9372 Econ...

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