Back ECO200_ProblemSet_1.pdf Q 2 0 ECO 200: Microeconomic Theory Problem Set #1 Lectures 1 & 2 Due Date: 25 September, 10pm Total Points: 30 Problem 1: Drawing Indifference Curves [15 Points] Suppose that an individual gains utility from the two goods Food (F) and Books (B) according to the following utility function: U(F, B) = Max(0, F - 2) * Min(4, B) Note: for the purposes of drawing, keep B on the x-axis and F on the y-axis. A hint for this question: it is easier to break the utility function into ranges. For example, the Utility Function will look different for if F 2, but it will make it possible to differentiate the function over these ranges. 1. What is the Marginal Utility of F (MUF) and Marginal Utility of B (MUs) as functions of F and B? [Note there will be different ranges on this as well. For example, your MUF function will look different for F 2.] [3 points] 2. Draw an Indifference Curve that represents the Utility Levels U = 8. Label at least two points on this indifference curve. [4 points] 3. What is this individual's Marginal Rate of Substitution (MRS) as a function of F & B? [Note there will be kinks and jumps. You will need to have different MRS functions of different ranges - for example, if F 2.] [3 points] 4. If this individual consumer 4 units of Food and 3 units of Books, what is the slope of their Indifference Curve? [1 point] 5. Do either of these goods exhibit satiation? Explain your answer. [1 point] 6. Are these preferences Weakly Convex? Strongly Convex? Why or why not? [2 points] 7. Are these what we call "Well-Behaved Preferences"? Why or why not? [1 point] 888 n Dashboard Calendar To Do Notifications Inbox