Question: 3. A consumer has a quasi-linear utility function (u - v (x1) + x2) . Further, suppose income is 50, initially p1 - p2 =

3. A consumer has a quasi-linear utility function (u - v
(x1) + x2) . Further, suppose income is 50, initially p1 -

3. A consumer has a quasi-linear utility function (u - v (x1) + x2) . Further, suppose income is 50, initially p1 - p2 = 1, but then p1 rises to 2. Show graphically the CV and EV associated with this price increase for good 1. Which is larger? Why? 4. Sketch the AC, MC and AVC curve for a technology that has a U-shaped AVC curve. Pro- vide an explanation for each point where AVC and MC are equal. 5. A firm has a long run cost function given by C (y) - 200 + 2y2. Sketch the associated long run AC curve. On your graph include a short run AC curve at y - 5. Explain why the SRAC has the shape you sketched

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