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198s2009.hw1

# 198s2009.hw1 - C cannot be aggregated among different...

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Department of Economics, HKUST ECON 198 MICROECONOMIC THEORY I Semester: Spring 2009 Prof. S. F. Leung Lecture time: Mon & Wed 10:30am - 11:50am E-mail: [email protected] Teaching assistant: Peter TSUI (E-mail: [email protected], Office: 2393) Tutorial hour: Fri 5:00pm-5:50pm Tutorial room: 2502 Homework #1 Due in class on Wednesday, March 4, 2009 1. Snyder and Nicholson, p. 106, Problem 3.1 ( x, y, and z denote goods) 2. Snyder and Nicholson, p. 106, Problem 3.6 3. Snyder and Nicholson, p. 106, Problem 3.8 4. Snyder and Nicholson, p. 109, Problem 3.11 5. Snyder and Nicholson, p. 133, Problem 4.3 6. Snyder and Nicholson, p. 134, Problem 4.7 7. If John were given \$100, he would spend none of it on salmon. However, he claimed that he would be indifferent between receiving a \$100 bill and \$100 worth of salmon. Is he rational? Explain. 8. Choose the correct answer. Explain why each option is correct or incorrect. Utility A. is an index designed to rank options. B. is an arbitrary assignment of numbers to predict behavior.

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Unformatted text preview: C. cannot be aggregated among different individuals to measure welfare. D. All of the above. 9. Jenny’s mobile phone company has offered her a choice between the following billing plans: Plan A: Pay \$0.05 per call. Plan B: Pay an initial \$2 per week, which allows her up to 30 free calls. Any calls over 30 per week cost \$0.05 per call. If her income is \$12 per week and the other good costs \$1 per unit, plot her budget constraint for the two goods under the two plans. Which plan would she choose? Will your answer change if the cost per call in Plan B is reduced from \$0.05 to \$0.04? 10. “If James is forced (e.g., by his parents or the government) to consume a certain quantity of a particular commodity, his level of utility will be lower than if he can freely allocate his income.” With the help of a diagram, prove or disprove the statement. Does this prove that “free choice is the best choice”? Discuss....
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198s2009.hw1 - C cannot be aggregated among different...

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