AP/ECON 4010: ADVANCED MICROECONOMIC THEORY
PRACTICE MIDTERM
SECTION A: Short Answers. Explain briefly but clearly why each of the following
statements is true, false or uncertain.
1.
Indifference curves are convex to the origin because marginal utility is
diminishing for all goods.
2.
For the utility function U (x,y) = x
α
y
β
it can always be assumed that α + β = 1.
3.
Utility function U (x,y) = (xy)/(x+y) is homothetic.
4.
Expenditure functions are convex and rising in each price.
5.
If the axioms of rational consumer behavior are satisfied, constrained utility
maximization must occur at the point of tangency between the indifference curve
and the budget line.
6.
For the utility function U (x,y) = x
0.5
+ y
0.5
elasticity of substitution is
constant.
7.
For the utility function U (x,y) = x + ln y, the compensated and normal demand
functions for y are identical.
8.
If the demand for a good rises when income alone rises, then its demand must fall
when its price alone rises.
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 Winter '10
 Anam,Mahmudul
 Utility, $1, $2, $0, Marshallian

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