we de…ne them). True/False/Uncertain:? Question 2: In each of the following examples‚ a consumer purchases just two goods: x and y. Based on the information in each of the following parts‚ sketch a plausible set of indi¤erence curves (that is‚ draw at least two curves on a set of labeled axes‚ and indicate the direction of higher utility). Also‚ write down a utility function u(x; y) consistent with your graph. Note that although all these preferences should be assumed to be complete and transitive
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R^1/2 + 2. Determine whether the following utility functions have strictly convex indifference curves (Use diagram and/or calculus). a. U= x11/2 + x21/2 b. U= min(x1/5‚ x2/2) c. U=( x1 + x2)3 3. Consider the following utility functions ((Use diagram and/or calculus ). a. U= x14 x24 b. U= x11/4 x21/4 c. U = 5x1+3x2 i. Find MRS for each function ii. Graph the indifference curve for U= 1 for each utility function . iii. Check for convexity/strict convexity‚ monotonocity/strict
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Costs The Symmetry Between Production and Costs Total Product and Total Cost Curves Geometry of Average and Marginal Costs Curves Average Physical Product and Average Variable Costs Marginal Physical Product and Marginal Cost Costs in the Long Run Isocost Lines Cost Minimization The Expansion Path and the Long Run Total Cost Curve Average Cost and Marginal Cost in the Long Run Returns to Scale and the Long Run AC Curve Minimum Efficient Scale Technological Changes and Costs Technological Advance
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that supply is fixed then at any given quantity of money (M1) there will be a corresponding demand that varies inversely to the price level‚ i.e. a downward sloping demand curve and there will be an equilibrium price level that ‘clears the market’‚ i.e. demand equals supply. If the quantity of money is increased (M2) the demand curve will shift to the right‚ i.e. at the same price level demand will increase but‚ again‚ supply is fixed. A new equilibrium will be established at the same level of output
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Leadership or Dominant Firm Model I think this model is easiest to learn diagrammatically‚ and then mathematically. Here is the graph and then an explanation of what is happening: Notice first the total market demand curve for the industry as a whole. Then notice the marginal cost curve for the competitive fringe of firms. This is a model in which there is one firm which is dominant and then a fringe of small firms who are so small that they behave like perfectly competitive firms – they take the
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Problems and Solutions 1 CHAPTER 1—Problems 1.1 Problems on Bonds Exercise 1.1 On 12/04/01‚ consider a fixed-coupon bond whose features are the following: • face value: $1‚000 coupon rate: 8% • coupon frequency: semiannual • maturity: 05/06/04 • What are the future cash flows delivered by this bond? Solution 1.1 1. The coupon cash flow is equal to $40 8% × $1‚000 = $40 2 It is delivered on the following future dates: 05/06/02‚ 11/06/02‚ 05/06/03‚ 11/06/03 and 05/06/04. The redemption value
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creating the interest rate-sensitivity gap report? Limitations in the reliability of the interest rate-sensitivity gap as follows: Gap analysis does not capture basis risk or investment risk‚ is generally based on parallel shifts in the yield curve‚ does not incorporate future growth or changes in the mix of the business‚ and doest not account for the time value of money. Moreover‚ simple gap analysis (based on contractual term to maturity) assumes that the timing and amount of assets and liabilities
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Subject Review Questions and Solutions 1. Capital markets may operate under auction‚ over-the-counter or intermediated modes. Distinguish between these types of operation. Auction markets require the financial asset to be identical in terms of risk and cashflow & liquidity – the assets are then traded on a centralised exchange where all parties know prices – an example is the stock exchange – each share in a particular company is identical to all the others therefore you can have an auction
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An increase in demand for the product d. Reduction in excise taxes e. Reduction in interest costs 5. Which of the following is the supply curve under perfect competition? a. marginal cost curve b. average cost curve c. marginal cost curve above shut down point d. marginal cost curve above break- even point e. average variable cost curve 6. U shape of Long Run Average cost is due to the incidence of a. External economies of scale b. Internal economies of scale c. Internal
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workers to the size of the labour force: 1‚000‚000 / 23‚000‚000 = 4.3 %. 4. a) The poor who are at minimum subsistence and who aspire to middle class consumption patterns: This group values income highly relative to leisure‚ so the indifference curve is relatively flat. As the wage increases‚ the income constraint line rotates clockwise‚ and we would expect a relatively large increase in hours worked. This response is dominated by a substitution effect‚ but there may be a small income effect
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