Q1. Consider the following two lotteries:
L1 = (200, 0; p=0.7, 0.3) and
L2 = (1200, 0 ; p = 0.1, 0.9).
Let x1 and x2 be the sure amounts of money that an individual finds indifferent to L1 and L2. If his preferences are transitive and monotonic the individual must prefer L1 to L2
(a) if x1 ≥ x2
(b) if and only if x1 > x2
(c) if and only if x1 ≥ x2
d) if x1<x
Please tell me how to solve?
Q.2. Abhik’s utility function is given by U(x1, x2) = max{ x1, x2}. His preference structure violates axiom Z while his demand function for either x1 or x2 resembles the case where x1 and x2 are W goods.
(a) Z = monotonicity, W = perfect complements
(b) Z = convexity, W = perfect substitutes
(c) Z = convexity, W = perfect complements
(d) Z = monotonicity, W = perfect substitutes
This is B. Right ?
3. p1=a-b1q1 and p2=a-b2q2 (such that b1>b2) are the market demand curves of a monopolist in two markets between which communication is not possible, then in equilibrium:
(a) p1= p2
(b) p1>p2
(c) p1<p2
(d) no systematic relation between p1 and p2 exists.
Answer is b. Right ?
4. Amit’s preference is given by the utility function U= min{(x+2y),4y}. Amit has chosen 5 units each of X and Y when price of X is 2 units. Amit’s total spending on X and Y is
(a) 30
(b) 4
(c) 25
(d) Insufficient data
Answer is d. Right ?
Locked
