ECON 205: Intermediate Mathematics for Economics

SMU School of Economics; Fall 2019

Homework Assignments
Takashi Kunimoto

November 9, 2019

You are required to submit your work at my dropbox (or what you call pigeon-
hole) AB48 on the 5th floor of SOE/SOSS building by 5:00pm on the date specified
below.

1 Homework 1 (Due Date: Aug 29, 2019)

Question 1.1 (12 points) Consider the following implications and decide whether
the implication is true or not. Let x and y be real numbers.

1. x = 5 and y = −3 ⇒ x + y = 2.

2. x2 = 16 ⇒ x = 4.

3. (x − 3)2 (y + 2) > 0 ⇒ y > −2.

4. x3 = 8 ⇒ x = 2.

Question 1.2 (10 points) Let U = {1, 2, . . . , 11} be the universal set and define
A = {1, 4, 6} and B = {2, 11}. Answer the following:

1. A ∩ B?

2. A ∪ B?

3. B c = U \B?

4. Ac = U \A?

Question 1.3 (13 points) Let f (x) = ax3 + bx2 + cx + d. Then, show that

f (x + h) − f (x)
= 3ax2 + 2bx + c + 3axh + ah2 + bh.
h
0
Also, find f (x).

1
Question 1.4 (10 points) The total cost of producing x units of a commodity is
C(x) = x3 − 90x2 + 7500x, where x ≥ 0. Answer the following questions.
0
1. Compute the marginal cost function, C (x).

2. For which value of x is the marginal cost the least?

Question 1.5 (15 points) Differentiate the following functions.

√
1. f (x) = 35 x2 − 2x7 + 1
8 − x.

2. f (x) = (2x2 − 1)(x4 − 1).

3. f (x) = x5 + x1 (x5 + 1).

4. f (x) = ex x−2 .

5. f (x) = (x + ex )2 .

Question 1.6 (20 points) Find the equations for the tangents to the graphs of the
following functions at the specified points.

1. y = 3 − x − x2 at x = 1.

2. y = (x2 − 1)/(x2 + 1) at x = 1.

3. y = x12 + 1 (x2 − 1) at x = 2.

x4 +1
4. y = (x2 +1)(x+3)
at x = 0.

Question 1.7 (20 points) For each of the following functions, determine the in-
tervals where it is increasing.

1. y = 3x2 − 12x + 13.

2. y = (x4 − 6x2 )/4.

2x
3. y = (x2 +2)
.

x2 −x3
4. y = 2(x+1) .

2 Homework 2 (Due Date: Sep 5, 2019)

Question 2.1 (6 points) Compute the following:

1. dY /dt when Y = −3(V + 1)5 and V = t3 /3.

2. dK/dt when K = ALα and L = bt + c (A, a, b, and c are positive constants).

2
Question 2.2 (12 points) If u(z) denotes an individual’s utility of having income
(or consumption) z, then
00 0
R = −zu (z)/u (z)
is the coefficient of relative risk aversion. Compute R for the following utility
functions (where A1 , A2 , and ρ are positive constants with ρ 6= 1, and we assume
that z > 0):
√
1. u(z) = z.

2. u(z) = A1 − A2 z −2 .
z 1−ρ
3. u(z) = A1 + A2 (1−ρ) .

Question 2.3 (12 points) Answer the following questions

00
1. Compute y for y = 3x3 + 2x − 1.
000
2. Compute Y for Y = 1 − 2x2 + 6x3 .

3. Compute d3 z/dt3 for z = 120t − (1/3)t3 .

4. Compute f (4) (1) for f (z) = 100z −4 .

Question 2.4 (12 points) Determine the following using the rules for limits:

1. limx→0 (3 + 2x2 ).
3+2x
2. limx→−1 x−1 .

3. limx→2 (2x2 + 5)3 .

4. limt→8 (5t2 + t2 − t3 /8).

(y+1)5 −y 5
5. limy→0 y+1 .
1/z+2
6. limz→−2 z .

0
Question 2.5 (15 points) Use logarithmic differentiation to find f (x)/f (x) in the
following.
 1/3
x+1
1. f (x) = x−1 .

2. f (x) = x2x .
√
3. f (x) = x − 2(x2 + 1)(x4 + 6).

3
Question 2.6 (15 points) Find the intervals where the following functions are in-
creasing:

1. y = ln(4 − x2 ).

2. y = x3 ln x.
(1−ln x)2
3. y = 2x .

Question 2.7 (20 points) Let f : R → R be a function defined by

f (x) = ln(2 + ex−3 ).

Answer the following questions.

1. Show that f is strictly increasing.

2. Find the range of f .

3. Find an expression for the inverse function g of f .

4. Find the range of f over which g is well-defined.

0 0
5. Verify that f (3) = 1/g (ln 3).

Question 2.8 (8 points) Let f : R → R be defined by


3x − 2 if x ≤ 2
f (x) =
−x + 6 if x > 2.

Answer the following questions

1. Draw a graph of f .

2. Is f continuous at x = 2? If your answer is yes, verify it explicitly. If your

answer is no, provide a counterexample.

3 Homework 3 (Due Date: Sep 12, 2019)

Question 3.1 (10 points) Prove that
√ 1
1+x≈1+ x
2
for x close to 0.

Question 3.2 (10 points) Use the Intermediate Value Theorem to show that the
equation 10x4 − 15x3 + x2 − 1 = 0 has a solution between −1 and 1.

4
Question 3.3 (16 points) Find ∂z/∂x and ∂z/∂y for the following:
1. z = x2 + 3y 2 .
2. z = xy.
3. z = 5x4 y 2 − 2xy 5 .
4. z = ex+y .
5. z = exy .
6. z = ex /y.
7. z = ln(x + y).
8. z = ln(xy).
Question 3.4 (16 points) Find all first- and second-order partial derivatives for
the following:
1. z = x2 + e2y
2. z = y ln x
3. z = xy 2 − exy
4. z = xy
Question 3.5 (10 points) Let z = ln(x2 + y 2 )/2. Show that ∂ 2 z/∂x2 + ∂ 2 z/∂y 2 =
0.

Question 3.6 (9 points) Show that x2 + y 2 = 6 is a level curve of f (x, y) =

p
x2 + y 2 − x2 − y 2 + 2.

Question 3.7 (10 points) Verify that the points (−1, 5) and (1, 1) lie on the same
level curve for the function:
g(x, y) = (2x + y)3 − 2x + 5/y.

Question 3.8 (10 points) Let F (x, y) = ex−2y − ln(2x2 y). Answer the following
questions.
1. For which points (x, y) is F (x, y) well-defined?
2. Show that (x, y) = (1, 1/2) lies on the level curve F (x, y) = 1.
Question 3.9 (9 points) Let f (x, y, z) = xy + yz + zx. Answer the following
questions.
1. Calclulate f (−1, 2, 3).
2. Calculate f (a + 1, b + 1, c + 1) − f (a, b, c).
3. Show that f (tx, ty, tz) = t2 f (x, y, z) for all t > 0.

5
4 Homework 4 (Due Date: Sep 19, 2019)
Question 4.1 (12 points) Consider the functions: z = f (x, y), x = g(t, s) and
y = h(t, s). Answer the following questions.

1. Suppose that we are given

x = g(t, s) = (at + bs)2

√
y = h(t, s) = at + bs,

where a and b are constants. Find the differentials, dx and dy, in terms of dt
and ds.

2. Suppose that we are given

z = f (x, y) = xα y 1−α
x = g(t, s) = (t + s)2
√
y = h(t, s) = t + s.

Using the chain rule, find ∂z/∂s when t = s = 1/2.

Question 4.2 (7 points) Consider the equation:

exyz − 3xyz = 1.

Find ∂z/∂x when x = 1 and z = 1.

0
Question 4.3 (15 points) Using the implicit function theorem, find y for the fol-
00
lowing level curves. Also, find y using chain rule.

1. x2 y = 1

2. x − y + 3xy = 2

3. y 5 − x6 = 0.

Question 4.4 (14 points) Consider the following three matrices:

     
1 2 −3 3 −1 2 4 1 2
A= 5 0 2  ; B =  4 2 5  ; and C =  0 3 2  .
1 −1 1 2 0 3 1 −2 3

Find the matrices (i) A + B; (ii) A − B; (iii) AB; (iv) BA; (v) A(BC); and (vi)
(AB)C. You are required to provide the entire process of the derivation for each
small question.

6
Question 4.5 (8 points) Consider the following three matrices:
     
2 2 2 0 1 0
A= ; B= ; and I = .
1 5 3 2 0 1

Answer the following questions.

1. Find a matrix C satisfying (A − 2I)C = I.

2. Is there a matrix D satisfying (B − 2I)D = I? If your answer is yes, provide

such D. If your answer is no, argue why.

Question 4.6 (6 points) Consider the following matrices:

   
a11 a12 b11 b12
A= and B = .
a21 a22 b21 b22
0 0 0
Prove (AB) = B A explicitly.

Question 4.7 (8 points) For what values of a is

a2 − 1
 
a −3
 a+1 2 a2 + 4 
−3 4a −1

symmetric?

Question 4.8 (12 points) Consider the following matrices:

   
1 −1 0 1 2 3
A=  1 3 2  and B =  2 3 4 .
1 2 1 0 1 −1

Calculate (i) AB; (ii) |A|; (iii) |B|; (iv) |A| · |B|; and (v) |AB|.

Question 4.9 (8 points) Solve the equation:

 
 1−x 2 2 
 
 2
 1−x 2  = 0.

 2 2 1−x 

Question 4.10 (10 points) Use Cramer’s rule to solve the following system of
equations:

2x1 − 3x2 = 2
4x1 − 6x2 + x3 = 7
x1 + 10x2 = 1.

7
5 Homework 5 (Due Date: Sep 26, 2019)
Note that we cannot return your work on this assignment before the in-
class quiz. So, I strongly encourage you to photocopy your work before
submitting it to the pigeonhole (dropbox).

Question 5.1 (15 points) Consider the following matrices:

   
1 3 −7 a b c
C =  2 5 1  and D =  −13 14 −15  ,
1 2 7 −1 1 −1

where a, b, and c are constant real numbers. Answer the following questions.

1. Find the determinant |D|.

2. Compute the matrix product CD.

3. Find the values of a, b, and c for which D = C −1 .

4. Let  
1 0 2
A =  0 2 −2  ,
0 0 −1
and 
h1
H =  h2  ,
h3
where h1 , h2 , and h3 are constant real numbers. Show that there exists exactly
one 3 × 1 matrix Y such that AY = CH. (Hint: You do not need to find Y
for this question.)

5. Let B = C −1 AC and 
x1
X =  x2  .
x3
Show that X = C −1 Y is the solution to the equation BX = H.

Question 5.2 (9 points) Calculate the differentials of the following:

1. z = x3 + y 3 .
2
2. z = xey .

3. z = ln(x2 − y 2 ).

Question 5.3 (9 points) Let u = u(x, y). Answer the following questions.

8
 1. Find dz expressed in terms of dx and dy when z = x2 u.

2. Find dz expressed in terms of dx and dy when z = u2 .

3. Find dz expressed in terms of dx and dy when z = ln(xy + yu).

Question 5.4 (9 points) Let a = (1, 2, 2), b = (0, 0, −3), and c = (−2, 4, −3).
Find the following.

1. a + b + c;

2. a − 2b + 2c;

3. 3a + 2b − 3c.

Question 5.5 (9 points) Express the vector (4, −11) as a linear combination of
(2, −1) and (1, 4).

Question 5.6 (8 points) For what values of x are (x, −x−8, x, x) and (x, 1, −2, 1)
orthogonal?

Question 5.7 (10 points) Answer the following questions.

1. Find the equation for the line that passes through (3, −2, 2) and (10, 2, 1).

2. Find the equation for the line that passes through (1, 3, 1) and has the same
direction as (0, −1, 1).

Question 5.8 (16 points) The following system of equations defines both u =
u(x, y) and v = v(x, y) as continuously differentiable functions of x and y around
the point P where (x, y, u, v) = (1, 1, 1, 1):

2uv + v 2 = 2x + y
u − v = x2 − y 2 .

Answer the following questions.

1. Find the differentials of u and v expressed in terms of the differentials of x and

y.

2. Find ∂u/∂x and ∂v/∂x at P .

3. Find ∂u/∂y and ∂v/∂y at P .

4. If x decreases by 0.1 and y increases by 0.2 from their values at P , what are
the approximate changes in u and v?

9
Question 5.9 (15 points) The equation system:

ln(x + u) + uv − y 2 ev + y = 0
u2 − xv = v

defines u and v as continuously differentiable functions of x and y around the point

P where (x, y, u, v) = (2, 1, −1, 0). Answer the following questions.

1. Differentiate the system of equations with respect to x and evaluate them at

(x, y, u, v) = (2, 1, −1, 0). (Hint: Use the following formula:
∂ v 0
(x ) = vxv−1 + (xv ln x) · vx ).
∂x
0 0
2. Find the values of the partial derivatives ux and vx at P .

3. Differentiate the system of equations with respect to y and evaluate them at

(x, y, u, v) = (2, 1, −1, 0).
0 0
4. Find the values of the partial derivatives uy and vy at P .

5. Find an approximate value of u(1.99, 1.02).

Question 5.10 (an additional question, not for the grade of HW#5) A firm’s
cost per unit of output is given by the function:
wr
c(w, r) =
w+r
where r denote the rental price of capital and w denote the wage rate. Answer the
following questions.

1. Show that the function c(·) is a homogeneous function of w and r.

2. Show that the function c(·) satisfies Euler’s theorem for homogeneous functions.

3. Find all the second-order partial derivatives of c(·), and show that they are all
homogeneous of the same degree.

6 Homework 6 (Due Date: Oct 17, 2019)

Question 6.1 (9 points) Find the linear approximation of f about (0, 0) for the
following:

1. f (x, y) = (x + 1)5 (y + 1)6

√
2. f (x, y) = 1 + x + y

3. f (x, y) = ex ln(1 + y).

10
Question 6.2 (10 points) Find the tangent planes to the following surfaces at the
indicated points:

1. z = x2 + y 2 at (1, 2, 5)

2. z = (y − x2 )(y − 2x2 ) at (1, 3, 2).

Question 6.3 (18 points) Find the following integrals:

(t3 + 2t − 3)dt
R
1.

(x − 1)2 dx
R
2.
R
3. (x − 1)(x + 2)dx

(x + 2)3 dx
R
4.

(e3x − e2x + ex )dx

R
5.
x3 −3x+4
R
6. x dx.

Question 6.4 (8 points) Prove

Z
2x ln(x2 + a2 )dx = (x2 + a2 ) ln(x2 + a2 ) − x2 + C.

Question 6.5 (8 points) Find the general form of a function f whose second deriva-
00 0
tive f (x) is x2 . If we require in addition that f (0) = 1 and f (0) = −1, what is
f (x)?

Question 6.6 (16 points) Use integration by parts to evaluate the following:

Z 1
1. x ln(x + 2)dx
−1
Z 2
2. x2x dx
0
Z 1
3. x2 ex dx
0
3 √
Z
4. x 1 + xdx.
0

Question 6.7 (15 points) Calculate the following integrals.

11
 Z 1
1. (x4 − x9 )(x5 − 1)12 dx
0
Z
ln x
2. √ dx
x
Z 4
dx
3. p √ .
0 1+ x

Question 6.8 (8 points) The value v0 of a new car depreciates continuously at the
annual rate of 10% – that is, v(t) = v0 e−δt where δ = 0.1 is the rate of depreciation.
How many years does it take for the car to lose 90% of its original value?

Question 6.9 (8 points) An author is to be paid royalties for publishing a book.

Two alternatives offers are made:

1. The author can be paid $21,000 immediately.

2. There can be 5 equal annual payments of $4,600, the first being paid at once.

Which of these offers will be more valuable if the interest rate is 6% per annum?

7 Homework 7 (Due Date: Oct 24, 2019)

Question 7.1 (10 points) Consider

2x2
f (x) = .
x4 +1
Answer the following questions.
0
1. Derive f (x).

2. Find the maximum value of f on [0, ∞).

Question 7.2 (9 points) Find possible local extreme (maximum or minimum) points
for f (x) = e3x − 6ex , where x ∈ R = (−∞, ∞).

Question 7.3 (16 points) Consider

x2 + 1
f (x) = ,
x
which is defined over [1/2, 2]. Answer the following questions.

1. Show that f achieves the maximum and minimum over [1/2, 2].

2. Find all the stationary points of f over (1/2, 2).

12
 3. Compute f (1/2) and f (2).

4. Find the maximum point and minimum point of f over [1/2, 2].

Question 7.4 (15 points) Let f be the function defined over [1, e3 ] as

f (x) = (ln x)3 − 2(ln x)2 + ln x.

Answer the following questions.

1. Compute f (e1/3 ), f (e2 ), and f (e3 ).

2. Find the zeros of f (x).

3. Find the extreme (local maximum or minimum) points of f .

Question 7.5 (12 points) The price a firm obtains for a commodity varies with
demand q according to the inverse demand function, p(q) = 18 − 0.006q. The total
cost function is C(q) = 0.004q 2 + 4q + 4500. Answer the following questions.

1. Derive the firm’s profit function π(q).

2. Find the value of q that maximizes profit.

dq p ∗
3. Let η = dp q be the price elasticity of demand. Find the particular value of q
at which η = −1.

Question 7.6 (16 points) Consider the following function:

2 √
 
f (x) = 1 + x + 6.
x

Answer the following questions.

1. Find the domain of f and the intervals where f (x) is positive.

2. Find all stationary points of f .

3. Examine the limit of f (x) when x → 0 from both the left and the right. In
addition, examine the limit of f (x) when x → +∞.

4. Are the stationary points you found are the global maximum or minimum
points? If so, verify it. If not, argue why.

Question 7.7 (12 points) Let f be the function defined over (−∞, ∞) as
3
f (x) = x3 + x2 − 6x + 10.
2
Answer the following questions.

13
 1. Find the stationary points of f and determine the intervals where f is nonde-
creasing.

2. Find the inflection point for f .

Question 7.8 (10 points) A firm’s production function is f (L) = 12L2 − L3 /12,
where L denotes the number of workers, with L ∈ [0, 200]. Answer the following
questions.

1. What size of the work force (L∗ ) maximizes output q = f (L)?

2. What size of the work force (L∗∗ ) maximizes output per worker, f (L)/L?

8 Homework 8 (Due Date: Oct 31, 2019)

Question 8.1 (10 points) Investigate the definiteness of the following quadratic
forms:

1. Q(x1 , x2 ) = 5x21 − 2x1 x2 + x22

2. Q(x1 , x2 ) = −4x21 + 12x1 x2 − 9x22 .

Question 8.2 (14 points) The function f defined for all (x, y) ∈ R2 is give as
follows:
f (x, y) = x2 + y 2 − 6x + 8y + 35.
Answer the following questions.

1. Find a local minimum point of f .

2. Show that f (x, y) can be written in the form f (x, y) = (x − 3)2 + (y + 4)2 + 10.
Explain why this shows that the local minimum point you found in the previous
question is indeed the (global) minimum point of f .

Question 8.3 (12 points) The demands for a monopolist’s two products are de-
termined by the equations:

px = 25 − x,
py = 24 − 2y,

where px and py are the prices per unit of the two goods, respectively, and x and y
are the corresponding quantities. The costs of producing and selling x units of the
first good and y units of the other are given as

C(x, y) = 3x2 + 3xy + y 2 .

Answer the following questions.

14
 1. Find the monopolist’s profit π(x, y) from selling x units of the first good and
y units of the other good.

2. Find the local maximum values of x and y for π(x, y).

3. Verify that the local maximum values of x and y are in fact the (global) max-
imum point of π(x, y).

Question 8.4 (12 points) Consider the following function:

f (x, y) = x2 + 2xy 2 + 2y 2 .

Answer the following questions.

1. Find all the first- and second-order derivatives of f .

2. Find all the stationary points of f .

3. Classify these stationary points of f in the sense that you clarify whether it is
a local maximum, local minimum, or saddle point.

Question 8.5 (12 points) Consider the following three functions: (1) f (x, y) =
−x4 − y 4 ; (2) f (x, y) = x4 + y 4 ; and (3) f (x, y) = x3 + y 3 . Answer the following
questions.

1. Prove that the origin (0, 0) is a stationary point for each one of these functions.

2. For each one of these functions, derive the Hessian matrix H.

3. Prove that |H| = 0 evaluated at (x, y) = (0, 0) for each one of these functions.

4. By studying the functions directly, prove that the origin (0, 0) is respectively
a (global or local) maximum point for (1), a (global or local) minimum point
for (2), and a saddle point for (3).

Question 8.6 (12 points) Suppose a monopolist faces two types of markets, called
Market 1 and Market 2, respectively. These two markets are characterized their
respective (inverse) demand function as follows:

p1 = 200 − 2q1 ,
p2 = 180 − 4q2 ,

where p1 and p2 are the prices of the good at Market 1 and Market 2, respectively,
and q1 and q2 are the corresponding quantities. The cost function is

C(q1 , q2 ) = 20(q1 + q2 ).

Answer the following questions.

15
 1. How much should be sold in the two markets to maximize total profit? What
are the corresponding prices?

2. How much profit is lost if it becomes illegal to discriminate prices?

Question 8.7 (18 points) Let

f (x, y) = 4x − 2x2 − 2y 2 ,

and
D = (x, y) ∈ R2 | x2 + y 2 ≤ 25 .


We consider the following maximization problem:

max f (x, y) subject to (x, y) ∈ D.

(x,y)∈R2

Answer the following questions.

1. Show that D is a bounded set.

2. Show that f is a continuous function.

3. Show that D is a closed set.

4. Find the stationary points of f .

5. Argue why the maximization problem has the maximum and minimum points
of f over D.

6. Find the maximum and minimum points of f over D.

Question 8.8 (10 points) Using the Lagrangian method, find the only solution
candidate to the following opmization problem with an equality constraint:

max 10x1/2 y 1/3 subject to 2x + 4y = m,

(x,y)∈R2

where m > 0 is a constant.

9 Homework 9 (Due Date: Nov 14, 2019)

Question 9.1 (20 points) Solve the following optimization problem:

max 3xy subject to x2 + y 2 = 8.

(x,y)∈R2

Question 9.2 (20 points) Consider the following optimization problem:

√ √
max 2x + 3y subject to x + y = 5.
(x,y)∈R2

Answer the following questions.

16
 1. Using the Lagrangian method, solve the optimization problem.

2. Show that the Lagrangian method suggests the wrong answer.

3. Find the solution to the optimization problem.

4. Explain why the Lagrangian method does not work.

Question 9.3 (20 points) A firm uses two inputs x and y to produce its single
1 3
output. It has a production function: 4x 4 y 4 . This firm is constrained to use input
x = 1000. Suppose that the price of output p is 1 and input prices are also 1. Answer
the following questions.

1. Set up the Lagrangian function for the profit maximization problem.

2. Find (x∗ , y ∗ , λ∗ ) that satisfies the first-order conditions of the Lagrangian func-
tion.

Question 9.4 (20 √ points) Suppose that a firm produces a good with the production
function f (L, K) = LK. The firm wants to produce q, given that w and r are input
prices and p is output price. The firm thus minimizes the cost:
√
min C = wL + rK s.t. LK = q.
L,K

Answer the following questions.

1. Using the Lagrangian method, find the optimal choices, L∗ (w, r, q) and K ∗ (w, r, q).

2. Verify that the optimal choices derived in the previous question are the global
minimum point.

3. Define the minimal cost C ∗ = wL∗ (w, r, q) + rK ∗ (w, r, q). Find

∂C ∗ ∂C ∗ ∂C ∗
, and , when w = r = q = 1.
∂w ∂r ∂q

4. Assuming that the cost function C ∗ is twice continuously differentiable, show

that
∂K ∗ ∂L∗
= .
∂w ∂r
Question 9.5 (20 points) Consider the following utility maximization problem for
choosing two goods (x, y) subject to the budget constraint:
√
max u(x, y) = x + y subject to x + 4y = 100,
x≥0,y≥0

where the price of good x is 1 and that of good y is 4 and the consumer’s income is
100. Answer the following questions.

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 1. Using the Lagrangian method, find the quantities demanded for the two goods.

2. Suppose income increases from 100 to 101. What is the exact increase in the
optimal value of u(x, y) based on the Lagrangian method? Compare with the
value found in the previous question for the Lagrangian multiplier.

3. Suppose we change the budget constraint to px + qy = m, but keep the same

utility function. We assume that p, q, and m are positive constants. Using
the Lagrangian method, derive the quantities demanded of the two goods if
m > q 2 /4p.

4. Show that the solution candidate you found using the Lagrangian method in
the previous question is indeed the solution to the original constrained maxi-
mization problem.

10 Homework 10 (Due Date: Nov 21, 2019)

Question 10.1 (25 points) A consumer’s demands x, y, z for three goods are cho-
sen to maximize the utility function
√
U (x, y, z) = x + y − 1/z,

subject to the budget constraint px+qy+rz = m, where x ≥ 0, y > 0, z > 0; p, q, r > 0

√
and m ≥ pr + p2 /4q. Answer the following questions.

1. Write down the first-order conditions for a global maximum in the constrained
optimization problem.

2. Show that the constrained optimization problem has a solution.

3. Show that the first-order conditions you found above are sufficient for finding
a global maximum point.

4. Find the utility-maximizing demands for all three goods as functions of the
four variables (p, q, r, m).

5. Show that the maximized utility is given by the following function:

r
∗ m p r
U (p, q, r, m) = + −2 .
p 4q p

6. Find ∂U ∗ /∂m.

Question 10.2 (25 points) Consider the following problem:

1
max 4 − x2 − 4y subject to 6x − 4y ≤ a,
x,y 2
where a ∈ R is a constant. Answer the following questions.

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 1. Write down the Kuhn-Tucker conditions for the constrained maximization
problem.

2. Find a solution to the constrained maximization problem.

3. Derive V (a), which is the maximized objective function given a.

0
4. Verify that V (a) = λ, where λ is the Lagrange multiplier in the previous
question.

Question 10.3 (25 points) Consider the following problem:

max x2 + 2y 2 − x subject to x2 + y 2 ≤ 1.
x,y

Answer the following questions.

1. Write down the Lagrangian for the constrained maximization problem.

2. Find all pairs (x, y) that satisfy the Kuhn-Tucker conditions.

3. Find the solution to the problem.

Question 10.4 (25 points) Consider the following utility maximization problem:

max u(x, y) = x + ln(1 + y) subject to 16x + y ≤ 495, x ≥ 0, y ≥ 0,

x,y

where u(x, y) denotes the utility of the consumer when he consumes a consumption
bundle (x, y). Answer the following questions.

1. Write down the necessary Kuhn-Tucker conditions (with non-negativeity con-

straints) for a point (x∗ , y ∗ ) to be a solution.

2. Find the solution to the problem.

3. Estimate by how much utility will increase if income is increased from 495 to
500.

11 Homework 11 (Not for Submission)

Question 11.1 You may use the following convention: ∞ · 0 = 0 in this question.
Compute the following:

1. Z ∞
λe−λx dx
0

2. Z ∞
xλe−λx dx
0

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 3. Z ∞
(x − 1/λ)2 λe−λx dx
0

Question 11.2 Let f (x, y) = x3 − y 3 + 9xy. Answer the following questions.

1. Find all stationary points of f (x, y).

2. Classify all stationary points you found in the previous question.

3. Is there any local minimum point that corresponds to a global minimum point?
If so, verify it. If not, argue why.

Question 11.3 Consider the problem

max f (x, y) = x2 y subject to g(x, y) = 2x2 + y 2 = 3.

x,y

Solve this problem.

Question 11.4 Consider the constrained maximization problem

1
max 2x + y − x3 − xy − y 2 subject to x ≥ 1
4 and x + y ≤ 3
x,y 3
Answer the following questions.

1. Write down the Kuhn-Tucker conditions.

2. Show that the solution to the Kuhn-Tucker conditions has both Lagrange mul-
tipliers equal to zero.

3. Solve the constrained maximization problem.

Question 11.5 Consider the following problem:

max xey−x − 2ey subject to y ≤ 1 + x/2, x ≥ 0, y ≥ 0.

x,y

Assume that the constrained maximization problem has a solution. Then, solve this
constrained optimization problem using the Kuhn-Tucker conditions.

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