Advanced Microeconomics

Çağatay Kayı

Problem Set 0
1. Which of the following are statements? Are those that are statements true?
(a) Life is sweet.
(b) Is 2 a prime?
(c) Prove that 2 is a prime.
(d) The President of the United States in 1789 was a man.
(e) The President of the United States in 2017 will be a woman.

2. Construct truth tables for the following:

(a) not(A and B),
(b) not(A or B),
(c) not(A) or not(B),
(d) A or not(B),
(e) not(B) or B,
(f) not(B) and B.

3. Negate the following:

(a) A is true or B is false.
(b) A is false and B is true.
(c) A is true or B is true.

4. Rewrite the following as “if ..., then ...” statements.

(a) A necessary condition for Stuart to win the Championship is that he beats Peter.
(b) Regular work is sufficient to pass the course.
(c) To be President of the United States of America it is necessary to be born in the USA.

5. Find the contrapositive statements for the following:

(a) If x is prime, then x = 2 or x is odd.
(b) If S is a square, then S is a rectangle.
(c) A circle is an ellipse.

6. Write the converse of each of the following statements:

(a) If x > 5, then X is red.
(b) An integer can be even or odd but it cannot be both.
(c) Eating ice-cream is necessary for me to be happy all day.

7. Construct a truth table to show that not(A or B) is equivalent to not(A) and not(B).

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 8. Rewrite the following using ∀ and ∃. (a) For all integers x, x is odd or even. (b) There
√ exist two prime
numbers such that their sum is prime. (c) There exists a rational number greater than 2. (d) If x is a real
number, then x2 is greater than x.

9. Decide whether the following are true or false. Explain your answers.
(a) ∀x, ∃y such that (x2 = y), where both x and y are in R.
(b) ∀y, ∃x such that (x2 = y), where where both x and y are in R.
(c) ∀x, ∃y such that (x2 = y), where where both x and y are in Z.
(d) ∀y, ∃x such that (x2 = y), where where both x and y are in Z.

10. Find examples of the following:

(a) A non-constant function f : R → R such that f (x) = 0 for a finite number of x.
(b) A non-constant function f : R → R such that f (x) = 0 for an infinite number of x.
(c) A non-polynomial function f : R → R such that f (x) is always positive.
(d) A non-polynomial function f : R → R such that f (x) is negative for x < 0 and positive for x ≥ 0.

11. Find counterexamples to the following

(a) (1 − x)/x is not an integer for x ∈ Z,
√ √ √
(b) ∀x, y ∈ R, x + y = x + y
(c) If a < b and c < d, then ac < bd.

12. Prove that for all integers x ∈ Z and y ∈ Z, if xy is odd, then x and y are both odd.

13. Prove that the sum of a rational and an irrational number is an irrational number.
√
14. Prove or disprove: If x is irrational, then x is irrational.

15. Show that for each n ∈ N, we have 2n ≤ 2n .

16. Consider the function F : R2 × R → R such that F (x, y, z) = x3 z 2 − z 3 yx.

(a) Explain why there is no neighbourhoods U of (0, 0) and V of 0 such that there exists a function
z = g(x, y) defined for (x, y) ∈ U and z ∈ V and satisfying F (x, y, g(x, y)) = 0.
(b) Explain why the equation is soluble for z as a function of (x, y) near the point (1, 1, 1). Compute
the partial derivatives ∂z/∂x and ∂z/∂y at this point by using the partial derivatives of F .

17. Consider the functions

F1 : R3 × R3 → R such that 3x1 + 2x2 + x23 + z1 + z22 ,

F2 : R3 × R3 → R such that 4x1 + 3x2 + x3 + z12 + z2 + z3 + 2, and
F3 : R3 × R3 → R such that x1 + x3 + z12 + z3 + 2.

Discuss the solubility of the system of equations Fi (x1 , x2 , x3 , z1 , z2 , z3 ) = 0 where i = 1, 2, 3 for

z1 , z2 , z3 in terms of x1 , x2 , x3 in a neighbourhood of the point (0, 0, 0, 0, 0, −2).

18. Find the Hessian matrix D2 f of the following functions. Check whether D2 f is positive definite, negative
definite, positive semi-definitive, and negative semi-definitive.

2
 √
(a) f : R2++ −→ R such that f (x) = x21 + x2 at x = (1, 1) ∈ R2++ .
√
(b) f : R2++ −→ R such that f (x) = x1 x2 at each x ∈ R2++ .
(c) f : R3++ −→ R such that f (x) = x1 x2 + x2 x3 + x3 x1 at x = (1, 1, 1) ∈ R3++ .
 
2 0 −1 3
19. Compute the rank of the following matrix:  1 1 2 2  .
2 0 −1 1
20. Let ϕ : R −→ R be a strictly increasing function, i.e., for each x and y ∈ D such that x > y implies
ϕ(x) > ϕ(y). Prove that x is a maximum of f on D if and only if x is also a maximum of composition
ϕ ◦ f on D.

21. Prove or disprove that every bounded and continuous function on a closed subset of R attains a maximum.

22. Solve the following problem: max{2x1 x2 + 2x2 − x21 − 2x22 | (x1 , x2 ) ∈ R2 }.

23. Consider the Theorem of Karush-Kuhn-Tucker for local maxima. Determine whether the following state-
ments are true or false (by “false" we mean that it is not necessarily true). In each case, justify your answer
briefly.
(a) If a constraint is non-binding, then the corresponding KKT multiplier might be negative (< 0).
(b) If a constraint is binding, then the corresponding KKT multiplier is zero.
(c) If a KKT multiplier is strictly positive, then the corresponding constraint is binding.
(d) If a KKT multiplier is zero, then the corresponding constraint is non-binding.

24. Consider the following problem

max(x1 − 2)2 + (x2 − 3)2

subject to

3x1 + 2x2 ≥ 6,
−x1 + x2 ≤ 3,
x1 ≤ 2.

(a) Graphically, find all local maxima. What is the global maximum?
(b) Repeat part (a) analytically, using Karush-Kuhn-Tucker optimality conditions.
(c) Argue why or why not is the case that all local maximizers are also global maximizers in this maxi-
mization problem.

25. Show that the ”Cobb-Douglas" utility function u : R2+ → R defined by

u(x1 , x2 ) = xα1 xβ2 , where α, β > 0,

(a) is concave if α + β ≤ 1,
(b) is quasi-concave, but not concave if α + β > 1. Show also that h(x1 , x2 ) = ln(u(x1 , x2 )) is concave
for any value of α > 0 and β > 0.

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26. For each i ∈ {1, 2, ..., l}, let hi : Rn → R be quasi-concave. Then, D = {x ∈ Rn | for each i ∈
{1, 2, ..., l}, hi (x) ≥ 0} is convex.

27. Consider the following problem where a > 0:

max x + y
s.t. x2 + y 2 ≤ a2 ,
x ≤ 1.

(a) What can you say about the existence of a solution?

(b) Solve the maximization problem.
(c) How does the value function change with respect to a?

28. Let Φ : R ⇒ R be defined as

Φ(x) = [−|x|, |x|], for each x ∈ R.

Determine if Φ is upper semi–continuous and/or lower semi–continuous on R.

29. Let Φ : R ⇒ R be defined as

[0, x1 ] if x > 0

Φ(x) =
{0} x=0

Determine if Φ is upper semi–continuous and/or lower semi–continuous on R+ .

30. Let f : R+ × R+ → R be defined by:

f (x, a) = (x − 1) − (x − a)2 , (a, x) ∈ R+

2.

Define the correspondence D : R+ → 2R+ by:

D(a) = {y ∈ R+ : y ≤ a}, a ∈ R+ .

Let f ∗ (a) = max{f (x, a)|x ∈ D(a)} and D∗ (a) be the set of maximizers. Check whether the conditions
and the consequences of the Maximum Theorem hold.