practice midterm 1

practice midterm 1 - Econ3101 - Section 003 Intermediate...

Info iconThis preview shows pages 1–5. Sign up to view the full content.

View Full Document Right Arrow Icon
Econ3101 - Section 003 Intermediate Microeconomics Xavier Vinyals-Mirabent * Department of Economics University of Minnesota. Midterm 1 will be on Friday, October 15th, 2010. Practice Midterm 1. (*note: this list of exercises is not exhaustive and it may be the case that I ask about topics not covered here but seen in class.) * Borrowed from Erick Sager with permission. 1
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
1. Theory of Choice Consider a consumer who has the following utility function: u ( x,y ) = 3 x + 2 y (a) Draw the indifference curve through the bundle ( x 0 ,y 0 ) = (10 , 10), and indicate the direction of preferences. 0 5 10 15 20 25 0 5 10 15 20 25 (b) Do these preferences satisfy convexity (Axiom 4)? Justify your answer. You may use the above graph to illustrate your answer. If the preferences do in fact satisfy Axiom 4, relate your answer to the law of diminishing marginal utility. (c) Do these preferences satisfy non-satiation (Axiom 3)? Justify your answer. 2
Background image of page 2
2. Consmuer Optimization and Demand A (a) For P x > 0, P y > 0 and M > 0, can one find an interior solution (e.g. x * > 0 and y * > 0) to this consumer’s maximization problem? Justify your answer. (b) What is the direction of preferences for this consumer? Justify your answer. Also, indicate the direction on the graph below. (c) Given P x = 10, P y = 20 and M = 200, draw the budget constraint. 0 5 10 15 20 25 0 5 10 15 20 25 3
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
3. Consumer Optimization and Demand B Again, consider a consumer who has the utility function: u ( x,y ) = 30 x 2 3 y 1 3 (a) Write down the consumer’s maximization problem. (b) Find the demand functions
Background image of page 4
Image of page 5
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 9

practice midterm 1 - Econ3101 - Section 003 Intermediate...

This preview shows document pages 1 - 5. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online