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Advanced Microeconomic Theory I Question Paper

Advanced Microeconomic Theory I

Course:Master Of Economics

Institution: Kenyatta University question papers

Exam Year:2009

KENYATTA UNIVERSITY
UNIVERSITY EXAMINATIONS 2009/2010
SUPPLEMENTARY EXAMINATION FOR THE DEGREE
OF MASTER OF ECONOMICS

EET 500: ADVANCED MICROECONOMIC THEORY I

DATE: Monday
23rd November 2009
TIME: 9.00 am – 12.00 Noon

INSTRUCTIONS:
ANSWER ALL THE FOUR QUESTIONS.
1.
Given the following cost functions

C(W ,W ,Y =
answer the following questions.
1
2
) (W1 2) 5.0 Y
W
5
.
0
l

i)
Is the function concave in factor prices? Explain.

ii)
Is the function homogeneous in factor prices? If yes, state the degree of
homogeneity
and
if not explain why not.

iii)
Are the derived demands homogenous in input prices? Explain.

2.
A consumer has a utility function given as

U (x , x - x +1 + x +1

1
2 )
(
)2
1
(
)2
2

i)
Find the consumer’s ordinary demand functions and derive the indirect

utility function for this consumer.

ii)
Are the ordinary demand functions homogenous income and prices?

If yes, state the degree of homogeneity and if not say why not.

Page 1 of 2
3.
Assume that a production function takes the following form:

a
a
a
1
2
3
Y = AX
X
X
where ,
A a a and a are strictly Positive Parameters.
1
2
3
1
2
3

What, if anything , can be said about the value of the Parameters

a , a and a given that:
1
2
3

i)
The function is concave?

ii)
Factors are paid in their respective marginal products and that the total

factor payments completely exhaust the output?

iii)
The marginal products are all independent of the quantities of the
respective
input
used?

4. Given
U (x , x = 10x
x
derive the general form of the expenditure function
1
2 )
25
.
0
0 25
.
1
2

and the corresponding compensated demand functions.

Page 2 of 2

Advanced Microeconomic Theory I Question Paper

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