(60 marks total) Determine whether each of the following statements is True, False or Uncertain, and explain your answers. Answers without explanations will not be marked. Your answers are not supposed to be long. You should aim at half a page per question if you are hand-writing, or one-quarter of a page per question if you are typing. Marks will be deducted for extraneous answers.

1. (6 marks) The assumption of perfect divisibility (in consumption) is appropriate even on goods that cannot be physically divided (e.g., washing machines).

2. (6 marks) A consumer's budget line is kinked towards the origin (i.e., the kink is pointing towards the origin) if this consumer faces a lower price per unit of x as more x is consumed.

3. (6 marks) Suppose 1 Australian dollar is worth 0.7 US dollar. Consider an Australian consumer who faces prices and income in Australian dollars. If we express all prices and income in US dollars instead, we should multiply both intercepts of this consumer's budget line by 0.7.