practice midterm 1

practice midterm 1 - Econ3101 Section 003 Intermediate...

Info icon This 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
Image of page 1

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

View Full Document Right 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
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
Image of page 3

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

View Full Document Right 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.
Image of page 4
Image of page 5
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern