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Problem Set 2

This document is a problem set for a Microeconomics course, focusing on utility functions and indifference curves. It includes short answer questions requiring graphical representations and theoretical explanations, as well as multiple-choice questions related to the properties of indifference curves and utility functions. The assignment is due on October 26, 2022, and emphasizes the necessity of attempting all questions for credit.

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32 views4 pages

Problem Set 2

This document is a problem set for a Microeconomics course, focusing on utility functions and indifference curves. It includes short answer questions requiring graphical representations and theoretical explanations, as well as multiple-choice questions related to the properties of indifference curves and utility functions. The assignment is due on October 26, 2022, and emphasizes the necessity of attempting all questions for credit.

Uploaded by

kan000911
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Microeconomics I

Fall 2022 Crystal Wong


Problem Set 2
(Due 26 October 8:00 pm Wednesday)

For each problem set you turn in, you will get no score if you only answer multiple choice
questions. You must attempt all questions in order to receive full credits.

Short Questions

1. Draw the indifference maps for the following utility function:

a. 𝑈(𝑋1 , 𝑋2 ) = 𝑋1 + 5𝑋2
b, 𝑈(𝑋1 , 𝑋2 ) = min(𝑋1 , 5𝑋2 )
2. For each of the utility functions below, draw a set of indifference curves showing utility levels
U 12, U 16, and U 24.
a. U XY
b. U X Y
c. U X Y
d. What is true about the commodities in (b)?
e. What about the commodities in (c)?

3. If good 1 is a neuter, what is its marginal rate of substitution for good 2 (i.e. MRS of 1, in terms
of 2)?

4. Which of the following are positive monotonic transformations of 𝑢:

a) 𝑣 = 2𝑢 − 13
b) 𝑣 = −1/𝑢2
c)𝑣 = 𝑙𝑛𝑢 for u>0
d) 𝑣 = 𝑢2 for 𝑢>0

5. Show that the utility functions V(X,Y) = XaY1-a and U(X,Y) = a ln(X) + (1-a)ln(Y) represent
the same ordering of bundles.

1
Multiple Choice Questions

1) If two indifference curves were to intersect at a point, this would violate the assumption of
A) transitivity.
B) completeness.
C) Both A and B above.
D) None of the above.

2) Measuring "y" on the vertical axis and "x" on the horizontal axis, convexity of indifference
curves imply that the MRS of "x" for "y"
A) is decreasing as "x" increases.
B) is increasing as "x" increases.
C) is constant as "x" increases.
D) cannot be calculated for large levels of "x".

3) If two goods are perfect substitutes, then the indifference curves for those two goods would be
A) upward-sloping and concave to the origin.
B) downward-sloping and convex to the origin.
C) downward sloping and straight.
D) L-shaped.

4) If the utility function (U) between food (F) and clothing (C) can be represented as U = ,
the marginal utility of food equals
A) .
B) .
C) 1/2 .
D) 1/2 .

5) If two goods, "x" and "y", are perfect substitutes, then which of the following best represents
the utility function for the two goods?
A) U = x + y
B) U = x ∗ y
C) U = +
D) U = x / y

6) Which of the following utility functions has the same MRS as U(q1,q2) = q1 q2?
A) q11/2 q21/2
B) q1 + q2
C) q11/2 + q21/2
D) (q11/2 + q11/2)2

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