Homework 1
Economics 404
Due date: Sep 17
1. Joe is indierent between Coke and Pepsi, but he strictly prefers Jolt to Pepsi. One
day Joe is oered a choice between Jolt and Coke, and he chooses Coke. Prove that
Joe is not a rational consumer (according to
Homework 2
Economics 404
Due date: September 29
1. Prove the following principle for rational preferences: if x ! y and y " z then x " z.
2. Sam is rational, as dened in Angners book. He is indierent between Coke and Pepsi.
He is also indierent between Jo
Homework 6
Economics 404
Due date: November 19
1. Many people fully intend to start exercising some day. Suppose there are three dates: t=0,1
and 2. At time 0, two people, Hip and Hop, have the choice between the following two
options, A and B: (A) exerci
Economics 404 Midterm 1
October 6, 2014
Name
Instructions. Answer all 4 questions. You have 80 minutes. You can use a calculator, but no books or
notes. You cannot log on to Sakai during the test. Explain your answers: Answers without valid explanations
g
Homework 7
Economics 404
Due date: Dec 3
1. A student must do an unpleasant chore, but can do it in any one of the three periods t =
0, 1, 2. The chore incurs negative utility (disutility). The immediate utility of doing it in
period t = 0 is !4; in perio
Economics 404 Midterm 2
November 10, 2014
Name
Instructions. Answer all 5 questions. You have 90 minutes. You can use a calculator, but no books or
notes. You cannot log on to Sakai during the test. Explain your answers: Answers without valid explanations
Economics 404 Midterm 3
December 8, 2014
Instructions. Answer all 4 questions. You have 90 minutes. You can use a calculator, but
no books or notes. You cannot log on to Sakai during the test. Explain your answers: Answers
without valid explanations get z
Homework 5
Economics 404
Due date: November 3
1. Consider the following four lotteries (A,B,C and D): (A) 36% chance of winning 2800 and
60% chance of winning 2400; (B) win 2400 with probability 1; (C) 40% chance of winning
2800; (D) 4% chance of winning
Homework 4
Economics 404
Due date: October 22
Remark: all individuals in this problem set are expected-utility maximizers.
1. Consider two investments, A and B. Each can yield an income of either $200, $250 or $300,
but the probabilities associated with e
Homework 3
Economics 404
Due date: October 15
1. 99% of all hedge fund managers are normal, i.e., have normal skills. 1% are extraordinary, i.e., have extraordinary skills. A normal manager outperforms the market,
on average, 5 years out of 10. An extraor