Economics Department Faculty of Economics and Political Science English Section, Second Year Cairo University Intermediate Microeconomics

heory Fall !"#$ Dr% &e'a (assar, Dr% )'del*&ameed (a+ar Mr% )hmed ,aga', Ms% (esreen Selim utorial -./ on Chapter .0 Utility -1#/ ,UE2F)3SE0 (1) Khaled consumes two goods, x and y. His utility function is

U(x,y)=max{x, y}. The efo e x and y a e !e fect su"stitutes fo Khaled. (#) The utility function U(x1, x#) = # ln x1 $ % ln x# e! esents &o""' (ouglas ! efe ences. (%) ) !e son with utility function U(x, y) = * $ y# $ #x has non'con+ex ! efe ences. (,) -ith .uasi'linea ! efe ences, the slo!e of indiffe ence cu +es is constant along all ays th ough the o igin. (*) )laa has the utility function U(x, y) = max{x, y}. )laa/s ! efe ences a e con+ex. (0) ) !e son with the utility function U(x, y) = 11 $ y# $ x has con+ex ! efe ences. (2) ) !e son with the utility function U(x, y) = y $ x# has con+ex ! efe ences. (3) ) consume has ! efe ences e! esented "y the utility function U(x1,x#) = 11(x1# $ #x1x# $ x##) ' *1. 4o this consume , goods 1 and # a e !e fect su"stitutes. (5) )hmad6s utility function is U(x, y) = x#y, Ta e76s utility function is U(x, y) = x#y $ #x, )hmad and Ta e7 ha+e the same ! efe ences since Ta e76s utility function is a monotonic t ansfo mation of )hmed6s.

-1!/ MU3 IP3E C&4ICE 1UES I4(S0

1. 8sama has ! efe ences e! esented "y the utility function U(x,y)=#x$#y. He consumes 11 units of good x and 0 units of good y. 9f his consum!tion of good x is lowe ed to ,, how many units of y must he ha+e in o de to "e exactly as well off as "efo e: a. 1* ". 5 c. 1# d. 13 e. ;one of the a"o+e. #. ;ada/s utility function is U(x, y) = y $ *x*. <he has 1 unit of x and # units of y. 9f he consum!tion of x is educed to =e o, how much y must she ha+e in o de to "e exactly as well off as "efo e: a. 1, units ". 5 units c. 11 units d. 2 units e. ;one of the a"o+e %. >ngy consumes x1 and x# togethe in fixed ! o!o tions. <he always consumes # units of x1 fo e+e y unit of x#. 8ne utility function that desc i"es he ! efe ences is a. U(x1, x#) = #x1x#. ". U(x1, x#) = #x1 $ x#. c. U(x1, x#) = x1 $ #x#. d. U(x1, x#) = min{#x1, x#}. e. U(x1, x#) = min{x1, #x#}. ,. Ta e. has the utility function U(?), ?@) = ?)?@. His indiffe ence cu +e !assing th ough %# a!!les and 3 "ananas will also !ass th ough the !oint whe e he consumes , a!!les and a. 10 "ananas. ". %# "ananas. c. 03 "ananas. d. 2# "ananas. e. 0, "ananas. *. )yat/s utility function is U(x, y) = #*xy. <he has 1# units of good x and 3 units of good y. )smaa/s utility function fo the same two goods is U(x, y) = ,x $ ,y. )smaa has 5 units of x and 1% units of y.

a. )yat ! efe s )smaa/s "undle to he own "undle, "ut )smaa ! efe s he own "undle to )yat/s. ". )smaa ! efe s )yat/s "undle to he own, "ut )yat ! efe s he own "undle to )smaa/s. c. >ach ! efe s the othe /s "undle to he own. d. ;eithe ! efe s the othe /s "undle to he own. e. <ince they ha+e diffe ent ! efe ences, the e is not enough info mation to dete mine who en+ies whom. 0. 8mayma has ! efe ences e! esented "y the utility function U(x,y)=min{0x $ y, x $ #y}. 9f x is on the ho i=ontal axis and y is on the +e tical axis, what is the slo!e of his indiffe ence cu +e at the !oint (3, 5): a. '0 ". '#A0 c. '1A# d. '1A0 e. '3A5 2. >man/s utility function is U(x, y) = y $
, *

x. <he has #* units of x and

1# units of y. 9f he consum!tion of x is educed to 1, how many units of y would she need in o de to "e exactly as well off as "efo e: a. ,3 ". %2 c. %# d. 11# e. ;one of the a"o+e. 3. )"ee /s utility function is x# $ 10xw $ 0,w#, whe e x is he consum!tion of x and w is he consum!tion of w. a. )"ee /s ! efe ences a e noncon+ex. ". )"ee /s indiffe ence cu +es a e st aight lines. c. )"ee has a "liss !oint. d. )"ee /s indiffe ence cu +es a e hy!e "olas. e. ;one of the a"o+e. 5. (ina/s utility function is U(), @) = )@, whe e ) and @ a e the num"e s of a!!les and "ananas, es!ecti+ely, that he consumes. -hen (ina is consuming 1* a!!les and 51 "ananas, if we !ut a!!les on the ho i=ontal axis and "ananas on the +e tical axis, the slo!e of his indiffe ence cu +e at his cu ent consum!tion is a. '1*.
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". c. d. e.

'0. '1#. '1A0. '1A1#.

11.<u=an/s utility function is U(x, y) = % min{x, y} $ y. 9f we d aw he indiffe ence cu +es with x on the ho i=ontal axis and y on the +e tical axis, these indiffe ence cu +es a e a. made u! of two line segments that meet whe e x = ,y. 8ne of these line segments is +e tical and the othe has slo!e '1. ". B'sha!ed with 7in7s whe e x = ,y. c. B'sha!ed with 7in7s whe e x = y. d. made u! of two line segments that meet whe e x = y. 8ne of these line segments is ho i=ontal and the othe has slo!e '%. e. C'sha!ed with 7in7s whe e x = %y. 11.Dana has the utility function U(x, y) = min{,x $ y, *y}. -he e x is measu ed on the ho i=ontal axis and y on the +e tical axis, he indiffe ence cu +es consist of a a. +e tical line segment and a ho i=ontal line segment which meet in a 7in7 along the line y = ,x. ". +e tical line segment and a ho i=ontal line segment which meet in a 7in7 along the line x = ,y. c. ho i=ontal line segment and a negati+ely slo!ed line segment which meet in a 7in7 along the line x = y. d. !ositi+ely slo!ed line segment and a negati+ely slo!ed line segment which meet along the line x = y. e. ho i=ontal line segment and a !ositi+ely slo!ed line segment which meet in a 7in7 along the line x = ,y.
-1$/ 1UES I4(S )(D P,453EMS0

8n se!a ate g a!hs, d aw indiffe ence ma!s fo the following utility functions, ta7ing into conside ation that they a e all su"Eect to the "udget const aintF 1. #. %. ,. U1(x1, x#) = %x1 $ x# U#(x1, x#) = min{x1, #x#} U%(x1, x#)= x11A# $ x# U,(x1, x#)= x1# x#,
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