EC 501: Problem Set 1, Solutions
1. (a) The equation of the line is
212 32
F 32
=
.
C 0
100 0
This simplies as follows:
F 32
180
=
C
100
F 32 =
9
C
5
9
F = 32 + C.
5
(b) F = C when
9
F = 32 + F
5
4
F
EC 501: Problem Set 2, Solutions
1. (a) To nd the compensated demand functions, we need to solve the
problem:
M inimize
E = pa A + pb B
1
1
A 2 B 2 = U.
subject to
The Lagrangian for this problem is
1
EC 501: Problem Set 1
(Due in class on Tuesday, September 9)
1.
(a) Find the relationship between the Centigrade (C) and Fahrenheit (F) temperature scales,
given that (i) the relationship is linear, (
EC 501: Problem Set 5
(Due in class on Tuesday, October 16)
1.
The Widget Co. can produce widgets according to the formula:
q = 5K L
where q is the output of widgets, and K, L are the quantities of ca
EC 501: Problem Set 6, Solutions
1. (a) To solve this problem, we use a discrete version of the formula
dpd
=
dT
We use
s
s
.
d
s
T.
s d
Substituting the values in this case, we get
pd =
pd =
0.8
1.
EC 501: Problem Set 3, Solutions
1. (a) Comparing situations 1 and 2, we can see I is the same at $90, but p2
has fallen from $1 to $ 21 . So
12:
1
price ef f ect of p2 f rom $1 to $ .
2
We see that X
EC 501: Problem Set 3, Solutions
1. This follows from the Generalized Engels Law, that the weighted average
of income elasticities must be equal to 1:
n
i i = 1.
i=1
Now a luxury is a good for which i
EC 501: Problem Set 1
(Due in class on Tuesday, September 18)
1.
Jack Sprat will eat no fat; his wife will eat no lean. Suppose lean and fat are the only
two goods Jack and his wife consume. Find thei
EC 501: Problem Set 1, Solutions
1. Suppose Jacks utility function is UJ (LJ , FJ ), where LJ is the amount of
lean and FJ is the amount of fat he consumes. Since he never
actually eats any fat, his u
EC 501: Problem Set 2
(Due in class on Tuesday, September 25)
1.
Adam's utility function is U = A1/2 B1/2 where A, B represent the number of apples and
bananas respectively that he consumes.
(a) Find
1
Chapter 2
Theory of Consumer Behavior
Consumers or households are the economic agents whose primary economic activity is
consumption of goods and services. This chapter will be concerned with how mi
EC 501: Problem Set 9, Solutions
1. (a) Under perfect competition in the long run, each rm will produce at
the minimum point of the AC curve. Now
AC =
200
+ 0.5q
q
and so AC is at a minimum where
dAC
EC 501: Problem Set 4, Solutions
1. (a) A simple way to think about this is to treat Joes income as pa A0
and then nd the demand functions in the usual way. Since the utility
function is Cobb-Douglas,
EC 501: Problem Set 5, Solutions
1. (a) To test for returns to scale, suppose capital and labor inputs are xed
at K0 , L0 and output is
1
3
4
4
q0 = 5K0 L0 .
Now lets change capital and labor inputs b
EC 501: Problem Set 7, Solutions
1. (a) We can nd the ppf by solving the problem:
M aximize Y = 3Ly
subject to X = 3Lx
and Lx + Ly = 66.
In this case, because there is only one factor of production, t
EC 501: Problem Set 9
(Due in class on Tuesday, November 20)
1.
The demand for bread in Munchkinland is given by
Q = 300-5P
where Q: quantity, P: price. The long run cost function of each bakery is gi
EC 501: Problem Set #3
(Due in class on Tuesday, October 2)
1. Show that, if a consumer consumes just two goods, they cannot both be luxuries.
2. When the price of gasoline is $1 per gallon, you consu
Chapter 4
Extensions of Consumer
Theory
In the theory of consumer behavior, our starting point has been the consumers
income or budget constraint, which she then must choose how to spend in order
to m
EC 501: Problem Set 4, Solutions
1. (a) With a Cobb-Douglas utility function, the household will maintain
fixed budget shares of the goods, with the shares in this example being
f = 21 and c = 12 . Th
Chapter 3
Applications of Consumer
Theory
The theory of consumer behavior gives us a powerful tool to analyze a broad
range of issues beyond the obvious one of understanding how consumers might
respon
EC 501: Problem Set 8
(Due in class on Tuesday, November 13)
1.
Liz Baylor has a $100,000 ring and keeps $100,000 cash in a checking account that pays no
interest. If the ring is stolen, Liz will be f
Lecture Notes in
Microeconomic Theory
This is a revised version of the book, last updated January 1st, 2016.
Please e-mail me any comments and corrections.
Ariel Rubinstein
[email protected]
Lectu
EC 501: Problem Set 7
(Due in class on Tuesday, November 6)
1.
In the economy of Ricardia, two consumer goods, X and Y, are produced from a single
factor input, labor, according to the production func
EC 501
Final Exam
December 18, 2010
Answer all questions, showing all your work. Try to use diagrams wherever
possible. Time allowed: 2 hours. Good luck! (Each question is worth 20 points.)
1.
The dem
EC 501: Problem Set 8, Solutions
1. Without insurance, Lizs expected utility is
(EU )0 =
1
99
U (0) +
U (100, 000).
100
100
With insurance at a premium of her expected utility is
(EU )1 = U (100, 000
EC 501: Problem Set 2
(Due in class on Tuesday, September 16)
1.
Jack Sprat will eat no fat; his wife will eat no lean. Suppose lean and fat are the only
two goods Jack and his wife consume. Find thei
Answers to End-of-Chapter
Exercises
Chapter 2: Theory of Consumer Behavior
2I
5pg ,
1. (a) G =
3I
5pM
M=
(b) M = 10,
G = 40.
(c) M = 10,
.
G = 80.
2. X =
I
px +py .
3. False.
4. See Chapter.
5. (a) x
EC 501: Problem Set 6
(Due in class on Tuesday, October 23)
1. The market for calculators is perfectly competitive. The current price is $30 and 2 million
calculators are sold annually. The elasticity
Chapter 7
General Equilibrium and
Welfare Economics
General equilibrium analysis is the study of the whole economy as an aggregate
of all the individual markets, taking into account the relationships
Chapter 9
Monopoly and Market Power
The optimality theorems of welfare economics require some stringent conditions
in order to hold, conditions that do not always hold in practice. Starting with
this
EC 501A1
Mid-term Exam
Oct 25, 2012
Answer all questions, showing all your work. Try to use diagrams wherever possible.
Time allowed: 1 hour and 20 minutes. Good luck! (Numbers in parentheses refer to
Economics 565, Topic 1:
Introduction
Professor Robert A. Margo
Boston University
Fall 2017
Introductory Classes (at least two)
Background
Ground Rules
Syllabus
Economic History of Economics and of
Eco