First_Midterm_2006

First_Midterm_2006 - Make sure you write your name and...

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Make sure you write your name and number IN THE BLUE BOOK. THE ONLY ANSWERS WE WILL CONSIDER ARE THE ONES IN THE BLUE BOOK NOT IN THE TEST! I.- True or False. Make sure you explain your answer or you get no points. No points for the right answer with the wrong explanation. (8 points each, total 48 points) 1.- A consumer prefers more to less of every good. Her income rises, and the price of one of the goods falls while other prices stay constant. These changes must have made her better off. 2.- If someone has the utility function U = 1,000 + 2 min { x , y }, then x and y are perfect complements for that person. 3.- Henrietta’s utility function is U ( x 1 , x 2 ) = x 1 x 2 . She has diminishing marginal rate of substitution between goods 1 and 2. 4.- Charlie’s utility function is U ( x , y ) = xy 2 . His marginal rate of substitution between x and y does not change if the amount of both goods doubles. 5.- Fred has a Cobb-Douglas utility function with exponents that sum to 1. Sally consumes the same two goods, but the two goods are perfect substitutes for her. Despite these differences, Fred and Sally have the same price offer curves. 6.- An increase in the interest rate can make a utility-maximizing
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First_Midterm_2006 - Make sure you write your name and...

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