ECON 708  Problem Set#6  Solutions
Professor
TA
:
:
Lones Smith
Jorge Vasquez
Problem 1 A person who is riskaverse always buys some amount of insurance, even if the price
is not actuarially fair. True or False. Justify your answer.
Solution: False. Let
ECON 708  Problem Set#4  Solutions
Professor
TA
:
:
Lones Smith
Jorge Vasquez
Problem 1 Consider the following utility function
u(x1 , x2 ) = x x1
1 2
Solve the following:
(a) Find the compensated demand function h(p, u).
(b) Find the expenditure functi
Problem Set #1
(Due Wednesday, February 12 at beginning of lecture)
Economics 705
Spring 2014
Instructions: Show/prove how you obtained your answers.
1. Consider the regression model yi = + i under the following assumptions:
A0)
(yi , xi ) i.i.d.
A1)
E(i
ECON 708  Problem Set#8  Solutions
Professor
TA
:
:
Lones Smith
Jorge Vasquez
Problem 1 Consider a matching market with two distinct sides, metaphorically called men
and women, but perhaps better thought of as a professional partnership, likes specialis
Econ 464
M. Muniagurria
Problem Set 1
Due date to be announced
I. Gains from Trade / Standard Trade Model
The following problems are from: General Equilibrium in Open and Closed Economies, and The
Gains from Trade, from International Trade, by J. Markusen
You are not allowed to consult any notes or books. You have to write your answers in the blue book that the persons proctoring the
exam give you. Your answers should reflect only your knowledge. Attempting to consult with others or to look at someone else
Economics 312
Macroeconomics
Noah Williams
Problem Set 3 Solution1
1. Suppose that there is a temporary change in consumer sentiment, so that households cut back on consumption spending, but this has no other direct eects on the
economy. Consider the Keyn
Noah Williams
Department of Economics
University of Wisconsin
Economics 312
Macroeconomics
Spring 2013
Midterm Examination Solutions
Instructions: This is a 75 minute examination worth 100 total points. Each question is
worth 25 points. Choose FOUR out of
ECON 708  Problem Set#5  Solutions
Professor
TA
:
:
Lones Smith
Jorge Vasquez
Problem 1 Consider a lottery that yields $10 and $20 each with chance 1/2. Consider a second
lottery that yields $5, $15 and $30 with chances 1/3, 5/9 and 1/9. Show that if an
ECON 708  Problem Set#1  Solutions
Professor
TA
:
:
Lones Smith
Jorge Vasquez
Problem 1 I go to buy a new Jetta to replace my Altima. There are just two auto dealers close
enough to search from. The rst dealer oers me $ 21,000. Searching at the other de
ECON 708  Problem Set#4
(Due on Friday 02/28/14 before discussion section)
Professor
TA
:
:
Lones Smith
Jorge Vasquez
Problem 1 Consider the following utility function
u(x1 , x2 ) = x x1
1 2
Solve the following:
(a) Find the compensated demand function h
ECON 708  Problem Set#2  Solutions
Professor
TA
:
:
Lones Smith
Jorge Vasquez
Problem 1 For which exponents does the CES production function with 1 > > obey the
law of diminishing returns?
Solution: Take f (K, L) = (K + L )
to K (note that this is WLOG)
Microeconomics II Econ 708, Spring 2014
Lecture#24
11
Prof: Lones Smith
TA: Jorge Vsquez
a
Game Theory
Big Picture
In Decision Theory, we studied one agent who doesnt care about others.
In General Equilibrium, we studied many agents who cares about othe
Microeconomics II Econ 708, Spring 2014
Lecture#26
11
Prof: Lones Smith
TA: Jorge Vsquez
a
Game Theory
The Minmax Theorem (vonNeuman, 1928)
Consider a two player game with nite actions. Next, we provide a simplify version of
the Minmax Theorem. First, s
Microeconomics II Econ 708, Spring 2014
Lecture#6
Prof: Lones Smith
TA: Jorge Vsquez
a
3. Consumer Theory
3.1
Revealed Preference
Walrasian demand function: In terms of the this second approach, the walrasian demand function x(p, w) is the consumers choi
Microeconomics II Econ 708, Spring 2014
Lecture#5
Prof: Lones Smith
TA: Jorge Vsquez
a
3. Consumer Theory
3.1
Preferences
Unlike producer theory, consumer theory is an ordinal theory. Everything is about
comparing alternatives.
To model individual decis
ECON 708  Problem Set#5
(Due on Friday 4th March 2016)
Professor
TA
:
:
Lones Smith
Josephine Xu & Alexander Clark
Problem 1 A worker whose utility function on leisure x and consumption y is,
u(x, y) = [x + y ]1/
Suppose he can work at a wage w per hour
Microeconomics II Econ 708, Spring 2016
Prof: Lones Smith
Lecture#2
TAs: Josephine Xu and Alexander Clark
2. Producer Theory
Unlike with consumer theory, output here is cardinal: quantity units matter!
The firm here is an inputoutput machine, yielding
ECON 708  Problem Set#3
(Due Friday, 19th February)
Professor
TA
:
:
Lones Smith
Josephine Xu & Alexander Clark
Problem 1 Consider the following utility function
1
u(x1 , x2 ) = x
1 x2
Solve the following:
(a) Find the compensated demand function h(p, u)
ECON 708  Discussion#1  Solutions
January 22, 2016
Professor
TAs
:
:
Lones Smith
Josephine Xu and Alexander Clark
Problem 1 (Optimal search for the best alternative, Weitzman (1979, ECTA) Suppose
the research department has been assigned the task of fin
ECON 708  Discussion#6
March 3, 2016
Professor
TA
:
:
Lones Smith
Josephine Xu & Alexander Clark
Problem 1 Assume that Melodie maximizes expected utility and is indifferent between lotteries
L and L0 . How does she compare L to the average lottery (L + L
Injured Man: Lones Smith
[email protected]
OK Man: Jorge V
asquez
[email protected]
Econ 708 Midterm#2
(Tuesday, March 27, 2014 in Class)
There are 75 points in 75 minutes. Points are at the right.
Rigorously justify everything with graphs or algebra.
Injured Man: Lones Smith
[email protected]
OK Man: Jorge V
asquez
[email protected]
Econ 708 Midterm#2  Solutions
(Tuesday, March 27, 2014 in Class)
There are 75 points in 75 minutes. Points are at the right.
Rigorously justify everything with graphs
ECON 708  Problem Set#2
(Due 5th Feb, Friday in Discussion)
January 28, 2016
Professor
TA
:
:
Lones Smith
Josephine Xu & Alexander Clark
Problem 1 For which exponents does the CES production function with 1 > > obey the
law of diminishing returns?
Proble
Professor: Lones Smith
[email protected]
TA: Josephine Xu
[email protected]
Econ 708 Midterm #2
(Tuesday, 17th March, 2015 HAPPY ST. PATRICKS DAY)
,_
_,
\."./
_
\
/
 Im the micro theory kitty

/
_
_
\
 ASCII me a question when in doubt 

a _ a


ECON 708  Practice for Midterm 2
(Not to be handed in)
Professor
TA
1
:
:
Lones Smith
Josephine Xu & Alexander Clark
Consumer Theory
1. Is this ever a legitimate expenditure function given positive prices p = (p1 , ., pn ),
log E(p, u) = u + a +
n
X
1 X
Microeconomics II Econ 708, Spring 2014
Lecture#23
10
10.6
Prof: Lones Smith
TA: Jorge Vsquez
a
General Equilibrium
Comparative Statics
Two important theorems about the relationship between the nal good market and the input
market. Both assume economies i
Microeconomics II Econ 708, Spring 2014
Lecture#20
10
10.3
Prof: Lones Smith
TA: Jorge Vsquez
a
General Equilibrium
Contract Curve and the Core
In previous sections we dened what we will understand for an ecient allocation. If we
collect all those ecient
Microeconomics II Econ 708, Spring 2014
Lecture#4
Prof: Lones Smith
TA: Jorge Vsquez
a
2. Producer Theory
2.1 Cost Minimization
Given inputs z = (z1 , ., zn ) and input prices w = (w1 , ., wn ), the problem of the
producer is:
min w z s.t. f (z) = q
n
zR