ECON 701 Midterm: Micro I August 2015 date 7-30-15-1_701
Document Summary
This exam has 4 questions and a total of 100 points. Answer each question in a separate exam book. If you need to make additional assumptions, state them clearly. Good luck: (25 pts) each day a worker consumes leisure, ; and income, x, and has a strictly increasing utility function u( ; x): leisure is measured in hours. Any risk averse expected utility maximizer strictly prefers g to ^g: (assume the. Eu maximizer has a strictly increasing, strictly concave c 1 utility function, v : r ! R. ) (b) (15 pts) axel is a newsboy who must choose whether to open his newsstand today. His pro(cid:133)t will be 0 if he keeps it closed. If he opens it, his pro(cid:133)t will be the random variable (cid:25) =(cid:26) (cid:0)15 with probability p. 35 with probability 1 (cid:0) p where p 2 (0; 1): axel is risk neutral, and so maximizes expected pro(cid:133)t.
