Question 1: 1. In a utility maximization problem with two goods X1, X2, suppose we have...

 

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Question 1: 1. In a utility maximization problem with two goods X1, X2, suppose we have found a maximum that is a corner solution where X1 = 0. Explain the relationship between MRS and pl/p2? 2. The cross-price elasticity of demand for strawberry jam and bread is -0.7. If the price of strawberry jam decreases, what will happen to the demand curve and the equilibrium price for bread? Question 2: Use separate graphs to sketch two indifference curves for people with each of the following utility functions: 1. U(x, y)=x+2y. 2. U(x, y) min{x,2y}. 3. U(x, y) = max(x,2y}. Question 3: Coach Steroid likes his players to be big, fast, and obedient. If player A is better than player B in two of these three characteristics, Steroid will prefer A to B. Three players try out for quarterback. Wilbur Westinghouse weighs 320 pounds, runs very slowly, and is quite obedient. Harold Hotpoint weighs 240 pounds, runs extremely fast, and is extremely disobedient. Jerry Jacuzzi weighs 150 pounds, runs at average speed, and is extremely obedient. Does Coach Steroid have transitive preferences? Explain Question 1: 1. In a utility maximization problem with two goods X1, X2, suppose we have found a maximum that is a corner solution where X1 = 0. Explain the relationship between MRS and pl/p2? 2. The cross-price elasticity of demand for strawberry jam and bread is -0.7. If the price of strawberry jam decreases, what will happen to the demand curve and the equilibrium price for bread? Question 2: Use separate graphs to sketch two indifference curves for people with each of the following utility functions: 1. U(x, y)=x+2y. 2. U(x, y) min{x,2y}. 3. U(x, y) = max(x,2y}. Question 3: Coach Steroid likes his players to be big, fast, and obedient. If player A is better than player B in two of these three characteristics, Steroid will prefer A to B. Three players try out for quarterback. Wilbur Westinghouse weighs 320 pounds, runs very slowly, and is quite obedient. Harold Hotpoint weighs 240 pounds, runs extremely fast, and is extremely disobedient. Jerry Jacuzzi weighs 150 pounds, runs at average speed, and is extremely obedient. Does Coach Steroid have transitive preferences? Explain