Econ 4011: Midterm Exam
October, 2014
Professor Jonathan Weinstein
This exam is 80 minutes long. Books, notes, calculators, and other electronic
devices are not allowed. Please write your name on every page you turn in. I
suggest graph paper for problems
Econ 4011: Final Exam with short answers
December 12, 2014
Professor Jonathan Weinstein
No books, notes, or electronic devices are allowed.
1. (15 points) Bob is throwing a big end-of-exams party. He has $1000 to spend on eggnog
(Good 1) and champagne (Go
From:
Subject:
Date:
To:
Washington University in St. Louis [email protected]
CORRECTION TO Local students named to Dean's List at Washington University in St. Louis
March 8, 2016 at 4:32 PM
Adam Kaufman Kaufman [email protected]
Contact:
Susan
Homework 2 - Suggested Solutions
Yu-Hung Chen
February 10, 2014
1
1.1
Standard Utility Functions
Perfect Substitutes
(i) The endowment and budget set
(2,2)
(ii) The individual will only consume x because M RS =
Therefore, the optimal purchases are (x ; y
3
Preferences
Constrained Optimization:
An Example
You have $20 to spend on apples ($1) and
oranges ($2)
This tells us your choice set
To model choice, we need preferences
Suppose your preference is to maximize xy,
where x is apples and y is oranges
We ca
6
Demand
Demand=Choice
We have covered how to model choices by a
single person
How does this relate to demand, which is the
total demand of many consumers?
A common assumption is that there is a
representative consumer, meaning that total
demand is the sa
Notes 23 More
Games
Econ 4011 Prof. Jonathan Weinstein
Golden Balls
https:/www.youtube.com/watch?v=S0qjK3TWZE8
Contestants interviewed on NPR Radiolab:
http:/www.radiolab.org/story/golden-rule/
The payoff matrix for Golden Balls
Nick
Split
Split (5,5)
Ibr
Second-Half Review
Econ 4011: Prof. Jonathan Weinstein
Purpose of this Document
A list of concepts and skills we have covered
If anything sounds unfamiliar to you, look up the relevant notes and
homework problems
Supply and DemandNotes 12,13
Finding marke
Externalities and
Market (in)efficiency
Econ 4011: Notes 13
(Ch. 34 in Varian)
Basic Market Equilibrium
Market
p
demand
Market
supply
p*
q*
D(p), S(p)
The equilibrium is efficient because all efficient trades (those
where a unit is more highly valued by b
Econ 4011: Notes 9
Exchange
(Ch. 31 of Varian)
Exchange
A
A A
( 1 , 2 )
Two consumers, A and B.
Their endowments of goods 1 and 2 are B
B B
( 1 , 2 ).
A
(6,2) (2,4).
B
E.g.
The total quantities available
are
and
6 2 8 units of good 1
A
1
B
1
A
2
B
2
Econ 4011: Notes 10
Exchange in Large Economies
Many Alices, Many Bobs
The concepts we learned with the Edgeworth box (with
just two people) are used to study full-size economies
The simplest extension is a model with two types of
people (many Alices and
12
Market Equilibrium
(Ch. 16 in Varian)
Market Equilibrium
A market is in equilibrium when total quantity
demanded by buyers equals total quantity
supplied by sellers.
Market Equilibrium
Market
p
demand
Market
supply
q=S(p)
q=D(p)
D(p), S(p)
Market Equil
Notes 20: Market
Games, II
Econ 4011, Spring 2014: Prof. Jonathan Weinstein
Bilateral Trade Example
Recall the bilateral double auction a bid and ask are submitted, and
if bid> ask then trade occurs at the average of these prices. If not,
no trade, and no
Game Theory, II
Econ 4011, Notes 17
How to find pure-strategy Nash
equilibria
Circle Alice's best reply in each column
Circle Bob's best reply in each row
Two circles in one cell signify an equilibrium
Finding NE Pure strategies
Bob
L
Alice
R
U
(3,9) (1,8
Econ 4011: Midterm solutions
Q1. To show that two utility functions represent the same preferences, we need to find a positive
monotonic transformation between the two functions. Otherwise, prove they dont represent the
same preferences by either providin
Econ 4011:
Intermediate
Microeconomic
s
Week 1: Introduction
(partially based on Varian, Ch.1)
Prof. Jonathan Weinstein
Washington University in St. Louis
Why economics?
Economics: A social science concerned chiefly
with description and analysis of the pr
Econ 4011: Notes 11
Exchange in Large Economies
Reminder: Competitive Outcome and Core
A
x2
xB
1
OB
OA
Green dot = endowment
Purple dot = competitive outcome; purple segment = core
Black line = budget set
Red= Alices indifference curve
Blue=Bob's indiffer
Substitution and
Income Effects
(roughly Ch. 8 of Varian)
Effects of a Price Change
What happens when a goods price decreases?
Substitution effect: the good is relatively cheaper, so
consumers substitute it for now relatively more
expensive other commodit
Game Theory, III
Econ 4011
Dominance and Nash Equilibria
A strategy which is dominated can never
be played in a Nash equilibrium
Why? Because it is not the best reply to
any strategy of the opponent
The same is true for any strategy
eliminated by itera
Econ 4011, Notes 13
Game Theory
Rock, paper, scissors
Bart: Trusty rock. Rock always
wins.
Lisa: Stupid Bart, always chooses
rock.
Game theory: What happens if Lisa
Game Theory
The study of interactive decision-making.
Interests of the players may be diam
Econ 4011
Notes 8
Buying and Selling
(Varian Ch. 9)
Endowments
The list of resource units with which a consumer
starts is his endowment.
A consumers endowment will be denoted by the
vector
(omega).
Endowments
( 1 , 2 ) (10, 2)
E.g.
states that the consu
Notes 21: Bargaining
Games
Econ 4011: Prof. Jonathan Weinstein
Bargaining: How to divide $1 (or $1
billion)
The NHL (National Horseshoes League) makes annual profits of $1
There is a bitter dispute as to how profits will be divided among
players and owner
Economics 4011 - Intermediate Microeconomic Theory
Jonathan Weinstein
[email protected]
Fall 2015, MW 1:00 PM, Seigle 304
Class Website: via Blackboard
Textbook
Varian, Intermediate Microeconomics. Any edition will work fine. All course material
will
Notes 19: Market
Games
Econ 4011, Spring 2014: Prof. Jonathan Weinstein
More on Second-Price Auctions
Assume buyers have private values, and the object has no
value to the seller
A simple second-price auction is efficient: since the buyers
will be honest
Monopoly
Notes 14, Econ 4011
(also Varian Ch. 24)
Pure monopoly
A monopolized market has a single seller.
The monopolist has the power to alter the market price by
adjusting its output level.
Why Monopolies?
What causes monopolies?
a legal fiat; e.g. US P
Economics 4011 - Intermediate Microeconomic Theory
Jonathan Weinstein
[email protected]
Fall 2016, MW 1:00-2:30 PM, McMillan G052
Class Website: on Blackboard
Books:
Textbook: Varian, Intermediate Microeconomics. I have the 9th edition, but it hasnt
b
Homework 6 - Suggested Solutions
Yu-Hung Chen
March 31, 2014
1(a) Dene W ,T , and F as the teacher chooses the exam on Wednesday,
Thursday, and Friday, respectively; in addition, dene w,t, and f as the student
studies on Wednesday, Thursday, and Friday, r
ECON4011 Intermediate Microeconomics
Homework 5 suggested solution
1. (a) D is the dominant strategy for player 1 and R is the dominant strategy for player 2. Hence the
only Nash equilibrium (NE) is (D, R).
(b) Player 1 is indierent between strategy U and