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Unformatted text preview: Economics 302 Silve Parviainen Intermediate Microeconomics Fall 2006 Midterm Examination I This is a 90minute exam, with closed books and notes. No calculators allowed. There are four questions in the exam. Each question is worth 25 points. Remember to label your graphs carefully, and show your work. GOOD LUCK! 1 Preferences and Utility Assume that a consumer’s preferences can be described with an utility function u ( x 1 , x 2 ) = x 1 x 2 2 . (a) Rank the following seven consumption bundles in preference order. (1 , 2) (2 , 1) (4 , 1) (2 , 2) (3 , 1) (1 , 3) (1 , 4) (b) Does any of the following utility functions u 2 = x 2 1 x 2 , u 3 = x 1 3 1 x 2 3 2 , and u 4 = √ x 1 x 2 represent the same preferences as u ? Explain your answers. 2 Consumer Optimum Your favorite weekend activity is to watch movies on DVD. Your preferences for this can be represented by a quasilinear utility function u ( x 1 , x 2 ) = 20 ln x 1 + x 2 , where x 1 = number of DVD’s rented and x 2 = composite of all other consumption. Rent of a movie iscomposite of all other consumption....
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This note was uploaded on 09/27/2008 for the course ECON 302 taught by Professor Toossi during the Fall '08 term at University of Illinois at Urbana–Champaign.
 Fall '08
 TOOSSI
 Microeconomics

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