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Questions and Answers
If A ~ B, then the individual is indifferent regarding the two consumption bundles A and B.
If A ~ B, then the individual is indifferent regarding the two consumption bundles A and B.
True (A)
If A ~ B, then it must also be that U(A) = U(B).
If A ~ B, then it must also be that U(A) = U(B).
True (A)
The indifference curves of the individual are strictly convex.
The indifference curves of the individual are strictly convex.
True (A)
The preferences of the individual can also be represented by the utility function U(X,Y) = 2XY.
The preferences of the individual can also be represented by the utility function U(X,Y) = 2XY.
Good X and good Y are perfect complements.
Good X and good Y are perfect complements.
The income expansion path is a straight line.
The income expansion path is a straight line.
In the utility maximum the individual obtains the utility U* = 5.
In the utility maximum the individual obtains the utility U* = 5.
If the price of good X doubles, then the total effect of the price change is equal to the income effect of the price change.
If the price of good X doubles, then the total effect of the price change is equal to the income effect of the price change.
The production function has increasing returns to scale.
The production function has increasing returns to scale.
The conditional factor demand for labor is L(Q) = Q.
The conditional factor demand for labor is L(Q) = Q.
The marginal costs of the firm are increasing in Q.
The marginal costs of the firm are increasing in Q.
Suppose the firm has to produce Q = 81. Then the total costs of the firm are TC = 6.
Suppose the firm has to produce Q = 81. Then the total costs of the firm are TC = 6.
At a price P* the profit maximizing firm should leave the market immediately.
At a price P* the profit maximizing firm should leave the market immediately.
The producer surplus of the firm corresponds to the area ABE.
The producer surplus of the firm corresponds to the area ABE.
The average fixed costs of producing Q* correspond to the area ABCD.
The average fixed costs of producing Q* correspond to the area ABCD.
The long-run supply curve of the firm is equal to the marginal cost curve from point F onward.
The long-run supply curve of the firm is equal to the marginal cost curve from point F onward.
The fixed costs of the two firms are equal to zero.
The fixed costs of the two firms are equal to zero.
If the two firms form a collusive monopoly, then the industry profit is π₁ + π₂ = 202.50.
If the two firms form a collusive monopoly, then the industry profit is π₁ + π₂ = 202.50.
If the two firms compete in quantity, then the market price in the Cournot-Nash equilibrium is P = 35.
If the two firms compete in quantity, then the market price in the Cournot-Nash equilibrium is P = 35.
If the two firms compete in prices, then the produced industry quantity in the Bertrand-Nash equilibrium is Q = q₁ + q₂ = 18.
If the two firms compete in prices, then the produced industry quantity in the Bertrand-Nash equilibrium is Q = q₁ + q₂ = 18.
The individual is risk-loving.
The individual is risk-loving.
The expected utility of the lottery is 90p.
The expected utility of the lottery is 90p.
If p = 1/2, then the utility of the expected payoff is 54.
If p = 1/2, then the utility of the expected payoff is 54.
If p = 1/2, then the certainty equivalent of the lottery is 4√5.
If p = 1/2, then the certainty equivalent of the lottery is 4√5.
If v < p + z(κ; λ), then the consumer always refrains from consuming the product.
If v < p + z(κ; λ), then the consumer always refrains from consuming the product.
For z(κ; λ) = κλ, the conditional indirect utility u(к, р; 1) with consumption decreases with an increase in the intensity of climate concerns λ, all other things being equal.
For z(κ; λ) = κλ, the conditional indirect utility u(к, р; 1) with consumption decreases with an increase in the intensity of climate concerns λ, all other things being equal.
The greater the 'loss' E from the climate externality caused by other consumers, the more consumers refrain from consuming the product.
The greater the 'loss' E from the climate externality caused by other consumers, the more consumers refrain from consuming the product.
Stronger climate concerns λ always lead to a higher profit maximizing price p of the product if the supplier's marginal cost c(κ) decrease with an increasing product carbon footprint κ.
Stronger climate concerns λ always lead to a higher profit maximizing price p of the product if the supplier's marginal cost c(κ) decrease with an increasing product carbon footprint κ.
Determine the number of subgames. (Select all that apply)
Determine the number of subgames. (Select all that apply)
How many pure-strategy combinations survive the iterated elimination of strictly dominated strategies (IESDS) for x = 5? (Select all that apply)
How many pure-strategy combinations survive the iterated elimination of strictly dominated strategies (IESDS) for x = 5? (Select all that apply)
For which values of x does the game have exactly one Nash equilibrium in pure strategies? (Select all that apply)
For which values of x does the game have exactly one Nash equilibrium in pure strategies? (Select all that apply)
For x = 0 determine the probability p with which player 1 plays the pure strategy L in the unique Nash equilibrium in mixed strategies. (Select all that apply)
For x = 0 determine the probability p with which player 1 plays the pure strategy L in the unique Nash equilibrium in mixed strategies. (Select all that apply)
Calculate the offer curve of individual A. (Select all that apply)
Calculate the offer curve of individual A. (Select all that apply)
Indicate the price ratio in the Walrasian equilibrium. (Select all that apply)
Indicate the price ratio in the Walrasian equilibrium. (Select all that apply)
What are the quantities that are consumed by individual B in the Walrasian equilibrium? (Select all that apply)
What are the quantities that are consumed by individual B in the Walrasian equilibrium? (Select all that apply)
Suppose that the country signs a free-trade agreement with the utility maximizing individual C that also consumes the goods l = 1,2 only. The utility function of individual C is given by Uc(x1, x2) = (x1)(x2). The initial endowment of individual C is given by wc = (0,1). The price ratio in the Walrasian equilibrium with free trade is = 3. Which of the following statements is correct? (Select all that apply)
Suppose that the country signs a free-trade agreement with the utility maximizing individual C that also consumes the goods l = 1,2 only. The utility function of individual C is given by Uc(x1, x2) = (x1)(x2). The initial endowment of individual C is given by wc = (0,1). The price ratio in the Walrasian equilibrium with free trade is = 3. Which of the following statements is correct? (Select all that apply)
Flashcards
Indifference Curve
Indifference Curve
In economics, the indifference curve is a graphical representation of all the combinations of two goods that provide a consumer with the same level of utility.
Marginal Rate of Substitution (MRS)
Marginal Rate of Substitution (MRS)
The marginal rate of substitution (MRS) is the rate at which a consumer is willing to trade one good for another while maintaining the same level of utility.
Strictly Convex Indifference Curve
Strictly Convex Indifference Curve
A strictly convex indifference curve implies that the consumer prefers a balanced consumption of both goods rather than consuming only one good excessively.
Production Function
Production Function
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Increasing Returns to Scale
Increasing Returns to Scale
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Conditional Factor Demand for Labor
Conditional Factor Demand for Labor
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Marginal Cost
Marginal Cost
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Producer Surplus
Producer Surplus
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Average Fixed Costs
Average Fixed Costs
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Long-Run Supply Curve
Long-Run Supply Curve
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Fixed Costs
Fixed Costs
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Variable Costs
Variable Costs
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Collusive Monopoly
Collusive Monopoly
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Cournot-Nash Equilibrium
Cournot-Nash Equilibrium
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Bertrand-Nash Equilibrium
Bertrand-Nash Equilibrium
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Risk-loving
Risk-loving
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Expected Utility
Expected Utility
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Certainty Equivalent
Certainty Equivalent
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Climate Concerns
Climate Concerns
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Utility Function
Utility Function
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Subgame
Subgame
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Pure Strategy Combination
Pure Strategy Combination
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Iterated Elimination of Strictly Dominated Strategies (IESDS)
Iterated Elimination of Strictly Dominated Strategies (IESDS)
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Nash Equilibrium
Nash Equilibrium
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Offer Curve
Offer Curve
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Walrasian Equilibrium
Walrasian Equilibrium
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Pareto Improvement
Pareto Improvement
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Study Notes
Microeconomics II Exam - Part 1
- Problem 1: Consumer Behavior
- Preferences of an individual are characterized by the utility function U(X, Y) = XY.
- If two consumption bundles (A and B) are indifferent (A~B), the utility derived from each bundle is equal (U(A) = U(B))
- Indifference curves are strictly convex.
- Preferences can also be represented by U(X,Y) = 2XY.
Problem 2: Individual and Market Demand
- A utility maximizing individual with the utility function U(X, Y) = max{2X, Y} spends all of their income (I = 15) on X and Y. Prices are PX = 3 and PY = 5.
- Goods X and Y are perfect complements.
- The income expansion path is a straight line.
- Utility in the utility maximum is U* = 5.
- If price of X doubles, the total effect of the price change is equal to the income effect of the price change.
Problem 3: Production and Cost
- Production function: Q(K, L) = 16K²L² (Q = output, K = capital, L = labor)
- Price of capital (R) = 4
- Price of labor (W) = 1
- Potential increasing returns to scale.
- Conditional factor demand for labor (L(Q)) = Q.
- Marginal costs increase with output (Q).
- At Q = 81, total costs (TC) = 6.
Problem 4: Perfect Competition and Monopoly
- Firm operates in a market with free entry and exit.
- Market price (P*) and profit maximizing quantity (Q*) are defined.
- Producer surplus is area ABE.
- Average fixed costs correspond to area ABCD.
- Long-run supply curve is equal to marginal cost curve from point F onwards.
Problem 5: Imperfect Competition
- Inverse demand: P(Q) = 50 – Q (Q = quantity, P = price).
- Market served by two firms (Q = Q1 + Q2).
- Constant marginal and average total costs (C1 and C2).
- Fixed costs are zero for the two firms in the given problem.
- Industry profit (π1 + π2) = 202.50 if two firms form a collusive monopoly.
- Market price in Cournot-Nash equilibrium (P) = 35 if two firms compete in quantity.
Problem 6: Investment, Time, & Insurance
- An individual participates in a lottery with a payoff (x) with probabilities (p) of success (x = 10) and failure (x = 0).
- Utility function: U(x) = x² - 10 (risk-loving individual).
- Expected utility of the lottery = 90p.
- Certainty equivalent of the lottery (if p = 1/2) = 4√5.
Problem 7: Monopoly and Climate Protection
- Consumer's conditional indirect utility is u(κ, p; λ) = v - p - z(κ; λ) - E.
- If v < p + z(κ; λ), the consumer refrains from consuming the product.
- Conditional indirect utility decreases with increasing λ if z(κ; λ) = κλ.
- Increased "loss"(E) from climate externality causes more consumption restraint.
- Marginal costs (c(k)) decreasing with increasing product carbon footprint (к) leads to a higher profit-maximising price (p) under stronger climate concerns (λ).
Problem 8: Game Theory (Part 2)
- Sequential game with choices between L, M, and R for player 1 and l, r for player 2.
- Number of subgames = 1 (in the game structure shown)
- Number of pure-strategy combinations surviving IESDS (x = 5) = 1
- Values of x for a game with one NE in pure strategies = x > 3.
- Probability of strategy L in Nash equilibrium (x = 0) = 1/3.
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Description
This quiz covers key concepts in Microeconomics II, focusing on consumer behavior, demand, and production costs. You will analyze utility functions, indifference curves, and the impact of price changes on demand. Prepare to apply economic theories to practical scenarios.
