Sample Final Exam Questions

# Sample Final Exam Questions - Previous Final Exam Questions...

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Previous Final Exam Questions: NOTE: No Old Exam Questions regarding the Consumption/Savings Decision nor Decision Making Under Risk and Uncertainty Question 1 (40 points total) Toni gets utility from X and Y. Toni gets the exact same amount of happiness from consuming one unit of X as she does from consuming two units of Y. Suppose the price of X is \$30 and the price of Y is \$10. Toni minimizes her expenditures subject to achieving utility level U . A. (10 points) What type of utility function represents Toni’s preferences? (I am looking for a name here) Write down an expression for Toni’s utility. B. (15 points) What is Toni’s expenditure minimizing commodity bundle, X c (Px, Py, U ), and Y c (Px, Py, U ), and her minimum expenditures to achieve utility level U ? C. (15 points) Carefully graph the solution to Toni’s expenditure minimization problem. . Question 2. (85 points total) Toni minimizes her expenditures subject to achieving utility level __ U . Suppose Toni’s utility function can be represented as 2 2 10 y x U = A. (10 points) What is the Lagrangian for this problem? B. (15 points) What are the first order conditions? C. (15 points) Solve for Toni’s (income) compensated demand functions X C (Px, Py, __ U ) and Y C (Px, Py, __ U ) D. (10 points) What are Toni’s minimum expenditures, E*(Px, Py, __ U ), to achieve a given level of utility at prices Px and Py (the expenditure function)? Question 3 (35 points total) 3A. (15 points) A consumer gets utility from the consumption of goods X and Y. Write down the Slutsky equation for the effect of a change in the price of good Y on the consumption of good X. 3B. (20 points) If the individual consumes a lot of Y, are X and Y more likely to be gross substitutes? Explain your answer carefully and refer to the Slutsky equation. Question 4. (15 points) If the elasticity of demand for bananas is -3, what will a 2% DECREASE in the price of bananas do to the total dollar amount spent on bananas each week (not the total quantity)? Explain your reasoning carefully. Question 5. (15 points) If the elasticity of demand for bananas is -2, what will a 5% INCREASE in the price of bananas do to the total dollar amount spent on bananas each week (not the total quantity)? Explain your reasoning carefully.

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Question 6. (50 points total) A. (25 points) Students get happiness from transportation and housing. A California university gives students \$600 per month for transportation and housing (assume the students have NO other source of income). In California the price of housing is \$100 and the price of
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## This note was uploaded on 04/02/2010 for the course ECON 100A ECON 100A taught by Professor Famulari during the Spring '10 term at UCSD.

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Sample Final Exam Questions - Previous Final Exam Questions...

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