Economics 104B
Problem Set #1 (Due April 15)
Spring 2010
1. Ralph works 40 hours a week at a $12.50 wage rate. He unexpectedly inherits a
trust fund that pays him $300 per week. How does inheritance of the trust fund
aect his budget line? Will he continue
Economics 104A
Solution for Problem Set #1
Winter 2010
1. Jims parents have provided a trust fund for his college education. Jim can receive
the entire trust fund on the condition that he spend it only on education.
a. Draw Jims budget line without the tr
Economics 104A
A Solution for Problem Set #2
Winter 2010
1. A consumer spends all his money on good 1 and good 2. The consumers utility
function is:
u(x1 , x2 ) = mincfw_4x1 , 2x1 + x2 .
The price of good 1 is p1 = 10, the price of good 2 is p2 = 5, and t
Economics 104A
Problem Set #3 (March 3)
Winter 2010
1. Suppose that a household in a state consumes 600 gallons of gasoline per year. A
15% gasoline tax is introduced and the household is provided with a $90 annual
tax rebate. Will the household be better
Syllabus - Econ 104A
Winter 2010
C-Z Qin (qin@econ.ucsb.edu)
Course Web page: http/www.econ.ucsb.edu/~qin/Econ104A
Economics 104A introduces methods of microeconomics and applies these methods to
the study of consumers, firms, and markets. As you work thr
Alfred and Betty are undergraduates. They each have a budget of $90 per quarter
to be spent on personal items, including movies, and there is nothing left over at
the end of the term. Movies at the local theater cost $3 per person, and they are
suciently
Exchange
When John has 40 gallons of gas and 20 bags of sugar, his MRS of gas for sugar is 5.
When Maria has 40 gallons of gas and 50 bags of sugar, her MRS of gas for sugar is 2. If
John trades 6 bags of sugar for 2 gallons of gas with Maria, both their
Economics 104A
Solution for Midterm Exam
Winter 2010
1. (8pt) Assume that John would like to purchase 50 gallons of gasoline at price of
$1.50 per gallon. However, the $1.50 is the result of a government price ceiling,
so there is a shortage, and John can
Economics 104A
Solution for Problem Set #3
Winter 2010
1. Suppose that a household in a state consumes 600 gallons of gasoline per year. A
15% gasoline tax is introduced and the household is provided with a $90 annual
tax rebate. Will the household be bet
Economics 104A
Solution for Midterm Exam
Winter 2008
1. (a) (5pt) Let u(x1 , x2 ) = x1 + x2 be a utility function for a consumer. Are the two
goods perfect substitutes for the consumer? Explain why or why not. Draw the
IC with utility level 1.
Answer: Not
Economics 104A
Problem Set #2 (Due Feb 3)
Winter 2010
1. A consumer spends all his money on good 1 and good 2. The consumers utility
function is:
u(x1 , x2 ) = mincfw_4x1 , 2x1 + x2 .
The price of good 1 is p1 = 10, the price of good 2 is p2 = 5, and the
Economics 104B
Problem Set #2 (Due April 29)
Spring 2010
1. Assume a very large number of rms all have the access to the same production
technology. The cost function associated with the technology is C (q ) = 40q
24q 2 + 4q 3 . If the inverse demand fun
Economics 104B
Old Midterm Exam and Solutions
1. The inverse demand for gasoline is pD (Q) = 5 0.002Q and the inverse supply is
pS (Q) = 0.2 + 0.004Q, where p is in dollars and Q is in gallons.
a. Find the competitive equilibrium.
Answer: In competitive e
Economics 104B
Old Midterm Exam and Solutions
1. Assume that the taxi industry in New York city is competitive. Also assume that the
marginal cost of a taxi ride is constant and equal to $5 per trip and that each taxi
is capable of making 20 trips a day.
Economics 104B
Problem Set #3 (Due May 28)
Spring 2010
1. You have been just hired as manager of a health spa. The owner has commissioned a market study that estimates the average consumers monthly demand
for visiting the health spa to be
1
Q = 10 P.
2
Th
Economics 104B
Problem Set #4 (Due June 3)
Spring 2010
1. a) Suppose your opponent is not playing her Nash equilibrium strategy. Should you play your Nash equilibrium strategy? Why or
why not?
b) Choose from the following the reason or reasons to adopt a
Economics 104B
Final Exam
Spring 2009
1. (10pt) A rm is the sole supplier of security systems in the product market and the sole
employer of locksmiths in the labor market. The demand curve for security systems
is given by P (Q) = 100 1 Q, where q is the
Economics 104B
Midterm Exam
Spring 2010
1. (8pt) Suppose that Roger could choose how many hours to work at wage rate of
w and chose to work 7 hours a day. The employer oers 1.5w for every hour he
works beyond a minimum of 8 hours per day. Show how his bud
Economics 104A
Problem Set #1 (Due Jan 21)
Winter 2010
1. Jims parents have provided a trust fund for his college education. Jim can receive
the entire trust fund on the condition that he spend it only on education.
a. Draw Jims budget line without the tr
Economics 104A
Solution for Problem Set #4
Winter 2010
1. Let u(x1 , x2 ) = 2 x1 + x2 be a consumers utility function. Let the prices of
good 1 and good 2 and the consumers income be p1 = 1, p2 = 2, and m = 100,
respectively.
a) What is the income eect ca