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 riskfree 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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 Spring '08
 DANNICATAMBAY
 Economics, Microeconomics, Equilibrium, Game Theory, nd

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