PS 1 - MICROECONOMICS 100A FALL 2009 - PROBLEM SET 1...

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MICROECONOMICS 100A FALL 2009 - PROBLEM SET 1 Tuesday, September 15, 2009, 11:00 am (in lecture) TRUE or FALSE and EXPLAIN: For each statement below, decide whether it is true of false, and explain the reasoning behind your answers in a few sentences. When appropriate, provide a diagram. 1. Today’s auto market and tomorrow’s auto market can be seen as one market. 2. Consider the utility function U ( x , y ) = 2 x + y . The marginal utilities of x and y are both diminishing and the MRS is also diminishing. 3. As one moves upward along a downward-sloping linear demand curve, demand be- comes more elastic. 4. At an optimal bundle it is always true that an individual’s marginal rate of substitution (MRS) between two goods equals the price ratio between the goods (i.e. MRS = P 1 / P 2 ). 5. If both cookies and cake are bads, then the indifference curve will have a negative slope. Multi-part Questions: Answer all parts of the following questions. 1.
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This note was uploaded on 02/12/2010 for the course ECON 100A taught by Professor Woroch during the Spring '08 term at Berkeley.

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PS 1 - MICROECONOMICS 100A FALL 2009 - PROBLEM SET 1...

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