ECON 101 Assignment 5

# ECON 101 Assignment 5 - I ntermediate M icroeconomics Econ...

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Intermediate Microeconomics (Econ 101) Spring, 2009 Assignment 5 This assignment is due no later than Thursday April 23 at the end of class. 1. vVORKOUTS 31.1, 12.2, 28.4, 29.2, 29.3, 17.8 2. ADDITIONAL PROBLEMS Question 1. True/false, and justify your answer. (1) A small economy has only two consumers, Anne and Brad. Anne's utility function is UA(x, y) = x + 154y!. Brad's utility function is UB(x, y) = x + 7y. At a Pareto optimal allocation in which both individuals consume some of each good, Anne consumes 121 units of good y. (2) If you invest half your money in a risk-free asset and half your money in a risky asset such that the standard deviation of the return on the risky asset is s, then the standard deviation of the return on your investment portfolio is ~. (3) Ann is an expected utility maximizer and her utility function for money is U(m) = yIni. This means Ann would prefer to bet \$10 on a fair coin toss (winning \$10 if heads come up and losing \$10 if tails come up) rather than not. (4) In a Nash equilibrium, everyone must be playing a dominant strategy. (5)

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ECON 101 Assignment 5 - I ntermediate M icroeconomics Econ...

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