Microeconomics (Fall 2016)
Simon W. Bowmaker
Problem Set 2
Submit at lecture on Monday, September 26
Write (they dont have to be typed) your answers on separate paper, not on this sheet of paper.
Please include:
your name
your recitation teachers name

Practice Problems 2015 with solutions
Professor Dubra
E 1:
Suppose that the utility function for radio shows R and cd listening C is:
U (R, C) = R2 C 5
Step 1: Get M RSR for C
Step 2: nd optimal R and C
E 2:
Suppose that U (R, C) = 4R + C, and that pR = 1

Practice Problems 1
Juan Dubra
1. Find all x R such that 2x +3x =12, and draw the set. In the same diagram, draw the
vector (2,3). In the same diagram, draw all x R such that 3x +3x =12 and all
x R such that 4x +3x =12. Draw also the vectors (3,3) and (4,

Lecture 21
Oligopoly, Part I
Last Week
Game Theory: how to act in strategic
situations
Dominant vs. dominated strategies
Nash Equilibrium
pure vs. mixed
simultaneous vs. sequential games
This week: game theory for P and Q
Oligopoly
Several firms co

CHAPTER 18
Asymmetric Information
Most of the problems in this chapter focus on different applications of the principal-agent
model. Additional problems are provided on auctions and the lemons problem.
Problem 18.5 requires the solution to a complicated m

CHAPTER 16
LABOR MARKETS
Because the subject of labor demand was extensively treated in Chapter 11, the problems
in this chapter focus primarily on labor supply and on equilibrium in the labor market.
Most of the labor supply problems (16.116.3) start wit

CHAPTER 17
CAPITAL AND TIME
The problems in this chapter are of two general types: (1) those that focus on
intertemporal maximization and (2) those that ask students to make fairly simple present
discounted value calculations. Before undertaking any of th

CHAPTER 13
GENERAL EQUILIBRIUM AND WELFARE
The problems in this chapter focus primarily on the simple two-good general equilibrium
model in which supply is represented by the production possibility frontier and
demand by a set of indifference curves. The

CHAPTER 7
Uncertainty and Information
Most of the problems in this chapter focus on illustrating the concept of risk aversion.
That is, they assume that individuals have concave utility of wealth functions and
therefore dislike variance in their wealth. F

CHAPTER 6
DEMAND RELATIONSHIPS AMONG GOODS
Two types of demand relationships are stressed in the problems to Chapter 6: cross-price
effects and composite commodity results. The general goal of these problems is to
illustrate how the demand for one particu

CHAPTER 2
MATHEMATICS FOR MICROECONOMICS
The problems in this chapter are primarily mathematical. They are intended to give students
some practice with the concepts introduced in Chapter 2, but the problems in themselves offer
few economic insights. Conse

Announcements:
Problem Set 2 will be posted later today: please submit hand-written
solutions at the recitation next week;
Readings for this week:
J&R: 1.2, 1.3, 1.4;
N&S Chapters 3, 4;
A. Adachi (NYU)
Microeconomics
2015
1 / 19
Preference Relations
Binar

Decision Making under Uncertainty
Todays presentation is based on Chapter 6 from Mas-Colell, Whinston
and Greens Microeconomic Theory; relevant part is posted on course
web-site.
I do not recommend reading J&R on this topic (notation and axiomatic
represe

Readings for this week: J&R 1.4, 1.5; N&S Ch. 4 - 6;
On Consumer Surplus N&S Ch. 5
You can start MWG Chapter 6 on Choice Under Uncertainty (posted
on website).
A new Homework will be posted tonight.
A. Adachi (NYU)
Microeconomics
2015
1 / 17
Utility Maxim

CHAPTER 19
EXTERNALITIES AND PUBLIC GOODS
The problems in this chapter illustrate how externalities in consumption or production
can affect the optimal allocation of resources and, in some cases, describe the remedial
action that may be appropriate. Many

Ch1 1067
.
x2
X3
Xp
X1
Xt
X0
X2
x1
O
123
X1 X2 X0
X1 X2Xt X0 Xt X2
X1 X3 Xp X1 X3
Xp X3, Xp>X3
1.11
1.1 A B
3
1.12 u (x1, , x 2 ) (x1, x 2) )
a u (x1, , x 2 ) (x

4.1
pi = p j i j
p i x = y
p
/
u ( x ) = g ( f ( x ) g (x)>0, f(kx)=kf(x)
x = arg max u ( x), s.t. px = y x = arg max f ( x), s.t. px = y
max f ( x ), px = y y.
x
y
1
x
max f ( x), p = 1
y
y
x
x
= 1 z = y max f ( z ), pz = 1
y
y
y max f ( ), p

More Game Theory
Concepts from Last Time
Best response
Strategy that maximizes a players payoff given
their beliefs about rivals strategies.
Nash Equilibrium
Simultaneous and sequential moves
Each players action is best response given other
players a

Lecture 24
Asymmetric Information: Games
with Hidden Actions
Review question 1
True or False? Signals can help prevent
adverse selection as long as a false
signal is costly to the person sending it.
Review question 2
How can a warranty at the seller's
e

Lecture 22
Oligopoly, Part 2
Competition and Oligopoly
Last Time: quantity competition (Cournot)
This Time
Quantity Leadership: the Stackelberg Game
Price Competition: The Bertrand Paradox
Competition and Oligopoly
Last Time: quantity competition (Cournot

Lecture 23
Asymmetric information
This week
So far we have assumed that each player
knows all payoffs
What if players have different
information about payoffs?
E.g. buyers and sellers of a car?
Adverse Selection in the
Market for Lemons
Buyers
Suppos

Microeconomics: Lecture 1
Introduction and Preliminaries
About the course
This is a sophisticated introduction to
economics for students like you!
You will learn
the most fundamental tools that economists use
how modern economic theory allows us to
un

Microeconomics: Lecture 11
Costs
and the Choice of Production Quantity
1
Producer Theory: Roadmap
Building Blocks:
Part I: Production
Production One Input Case
Technology
Part II: Production
Production Two Input Case
Marginal Rate of Technical Substit

Microeconomics: Lecture 10
Producer Theory: Part II
Producer Theory: Roadmap
Building Blocks:
Costs
Using the production function, we can map all
combinations of L and K that produce a given
output Q
But this doesnt tell us yet which combinations of
L and

Microeconomics: Lecture 17
Price Discrimination
Quiz on April 7th
Will include everything on last 3 HW sets
(through monopoly pricing)
15 minutes, a few short questions
Lecture 9
2
Price Discrimination
Last class: first-degree price
discrimination
Extre

Microeconomics: Lecture 9
Producer Theory: Part II
Producer Theory: Roadmap
Building Blocks:
Producer Theory: Part I
Firms as purposeful agents
Production function
Associated with a particular technology
Consider one input case (labor)
Marginal produ

Microeconomics: Lecture 8
Producer Theory: Part I
Producer Theory: Roadmap
Building Blocks:
Roadmap for Part I:
Lecture 8
3
Introduction
We have completed a 4-part analysis of consumer
behavior:
Consumer preferences
Consumers budget constraints
Utility

Microeconomics: Lecture 18
Choice and Uncertainty
Today: Introduce
Uncertainty and Risk
Building our toolkit for the remainder
of the class:
Probability and Uncertainty
Preferences Toward Risk
A short review of probability,
with real decisions
In the

MICROECONOMICS
FALL 2016
MW 2:003:15
Course Instructor: Simon Bowmaker
Office Hours: Tuesdays, 2:00 pm 4:00 pm
Office: KMC 858
Email address: sbowmake@stern.nyu.edu
Course Description: Economics is the study of production and

Microeconomics: Lecture 1
Introduction and Preliminaries
About the course
This is a sophisticated introduction to
economics for students like you
there will be some challenges, but you will be
surprised by how much you will achieve
You will learn
the

Chapter 3: Consumer Behavior
PART II
PRODUCERS, CONSUMERS, AND COMPETITIVE MARKETS
CHAPTER 3
CONSUMER BEHAVIOR
QUESTIONS FOR REVIEW
1. What are the four basic assumptions about individual preferences?
the significance or meaning of each.
Explain
(1) Prefe

Microeconomics: Lecture 4
Consumer Behavior (Part II)
Roadmap
Building blocks
Preferences and Axioms of Rationality (Part I)
Today: (Part II)
Representation of Rational Preferences: Utility
Affordable Bundles: Budget Set
Third Part:
A model of Consume

Microeconomics (Fall 2016)
Simon W. Bowmaker
Problem Set 1
Submit at lecture on Monday, September 19
Write (they dont have to be typed) your answers on separate paper, not on this sheet of
paper. Please include:
your name
your recitation teachers name