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Econ 51: Midterm
October 25, 2010
Instructions:
This is a closed book, closednotes exam. You are allowed to use a handheld calculator
(i.e., no laptop).
You have 110 minutes.
Please answer all 3 questions.
Please use a separate blue book for each question
.
Please write the name of your TA and section time on each blue book.
Note that throughout the midterm (and the class) log implies the
natural
logarithm.
Always remember:
think before you do the math
!
Good luck!
1. Short questions (31 points)
(a) (15 points; 3 points each) For each of the following vNM utility functions
u
(
x
) (with
x >
0), do they represent risk averse preferences, risk neutral preferences, risk loving
preferences, or neither?
(i)
u
(
x
) = 24
x
2
+ 9
x
(ii)
u
(
x
) = exp(7
x
+ 18)
(iii)
u
(
x
) = log(
x
) +
p
x
(iv)
u
(
x
) = 2
x
+ 22
(v)
u
(
x
) =
x
+ log(
x
)
(b) (4 points) There are two goods (
a
and
b
). Rob’s utility function is
u
R
(
a; b
) =
a
+
b
.
Tom’s utility function is
u
T
(
a; b
) = 3
a
+ 3
b
. Jerry’s utility function is
u
J
(
a; b
) =
10
a
+ 10
b
. There are 10 units of each good. Describe the set of
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This note was uploaded on 03/19/2011 for the course ECON 51 taught by Professor Tendall,m during the Winter '07 term at Stanford.
 Winter '07
 Tendall,M

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