Intermediate Microeconomics (ECO211)
DIPET 1 in Economics - ECNT
Semester: First Semester
Level: 300
Year: 2019
INTERMEDIATE MICROECONOMICS (ECON 301) CA - CATCH UP
TIME ALLOWED: 45 minutes
Question one
Cletus’s utility functions is U = (x
1
+2)(x
2
+6), where x
1
is the number of apples and x
2
the number of
bananas consumed.
a)
Fund out the slope of Cletus’ indifference curve through the bundle (4, 6).
b)
Three bundles that belong to this indifference curve are: (-, 0); (7, -); and (2, -). Complete the
blanks.
c)
Juana offers Cletus 9 bananas in exchange for 3 apples. Will Cletus accept the offer?
d)
Juana says to Cletus “Cletus, I do not understand you. Your MRS is -2. That means that an extra
apple is worth only twice as much to you as an extra banana. I offered you 3 bananas for every
apple you gave me. If I offer to give you more than your MRS you should want to trade with me”.
Is Juana right?
Question two
A student spends 8 hours per day listening to music. M hours are devoted to Mozart and B hours to
Beethoven. The student’s utility function is U = M
B
, where U measures utility.
a)
Write an equation for the student’s budget constraint.
b)
Determine the equilibrium quantities of M and B and hence the total utility of the student.
Good Luck!!!
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