Chapter 3

Quiz 2A for Class 2

3.1

Topics for Quiz 2A for Class 2

Partial Derivatives (useful topic, question 1)

The Chain Rule for Partial Derivatives (essential topic, but one some
students nd hard, covered in lecture 2, questions 2-3)
Homogeneous Functions (useful topic, questions 4-7)
The Chain Rule in Consumer Theory (essential topic, but one some students nd hard, questions 8-11)
These questions use the same mathematics as the other questions on
the chain rule.
Second Derivatives (useful topic, question 12)
The Implicit Function Theorem (more challenging topic, question 13)

3.2
3.2.1

Quiz 2A Questions
Partial derivatives (essential topic, questions 1-5)

Quiz 2A question 1
C (p0 $)
=
Csl
Write down an answer before going any further. Then consider the case where
q = 3 so
p0 $ = s1 $ 1 + s2 $ 2 + s3 $ 3

Use notation p0 $ =

Pq

l=1

sl $ l = The object of the question is to nd

21

CHAPTER 3. QUIZ 2A FOR CLASS 2

22

C (p0 $)
C (p0 $) C (p0 $) C (p0 $)
,
,
and a general expression for
=
Cs1
Cs2
Cs3
Csl
Now answer the question.
C (p0 $)
?
What is
Csl
and write down

1.
2.
3.

Pq
l=1

sl

l=1

$l

l=1

sl $ l

Pq
Pq

4. sl
5. $ l
6. dont know

3.3

The Chain Rule for Partial Derivatives (essential topic, questions 2-3)

Quiz 2A question 2
Suppose that

2
i (}1 > }2 ) = exp (}1 + }2 )

and j ({1 > {2 ) = i (}1 > }2 ) where }1 ({1 > {2 ) = 2{1 + 3{2 and }2 = 4{1 + 5{2 .
Cj ({1 > {2 )
=
Use the chain rule to nd
C{1
Which of the following answers are correct?

Cj ({1 > {2 )
2
= 12 (6{1 + 8{2 ) exp (6{1 + 8{2 )
C{1

Cj ({1 > {2 )
2.
= (6{1 + 8{2 ) exp (6{1 + 8{2 )2
C{1
1.

Cj ({1 > {2 )
= exp (2 (6{1 + 8{2 ))
C{1

Cj ({1 > {2 )
2
4.
= 2 ({1 + {2 ) exp ({1 + {2 )
C{1

Cj ({1 > {2 )
5.
= ({1 + {2 ) exp ({1 + {2 )2
C{1
3.

6. dont know

3.3. THE CHAIN RULE FOR PARTIAL DERIVATIVES (ESSENTIAL TOPIC, QUESTIONS 2-3)23
Quiz 2A question 3
A simple model of a rm has the rm using inputs N and O to produce output
t = N 1@4 O1@4 . The rm cannot aect the price s at which it sells its output,
or the prices y and z which it pays for its inputs. The rm chooses N and O
to maximize its prots
U (s> z> y> O> N) = sN 1@4 O1@4  yN  zO=
The rst order conditions for prot maximization are
CU (s> z> y> O> N)
CN
CU (s> z> y> O> N)
CO

=
=

1
sN 3@4 O1@4  y = 0
4
1
sN 1@4 O3@4  z = 0=
4

(3.1)
(3.2)

In this case the rst order conditions are su!cient for a maximum. (You will
learn next week that this is because sN 1@4 O1@4  yN  zO is a concave function
of N and O=) The rst order conditions imply that
N

O =

s2 3@2 1@2
z
y
16
s2 1@2 3@2
z
=
y
16
2

The prot function  (s> y> z) is dened as U (s> z> y> O> N) when N = s16 y3@2 z1@2
2
C (s> y> z)
and O = s16 y 1@2 z3@2 . Use the chain rule to nd
=
Cz
Hint: you will nd that this question is very much easier if you remember and
s2 3@2 1@2
z
y
use equations 3.1 and 3.2. You do not need to dierentiate N =
16
2
s 1@2 3@2
and O =
z
to answer this question.
y
16
C (s> y> z)
What is
?
Cz
1. N
2. N
3. N 2
4. O
5. O
6. O2
7. dont know

CHAPTER 3. QUIZ 2A FOR CLASS 2

24

3.3.1

Homogeneous Functions (useful topic, questions 47)

This is an important topic, which should not be di!cult. It is very important

that you read the relevant section of the chapter on working with mutlivariate
calculus on homogeneous functions carefully.
Quiz 2A question 4
Think about the Cobb-Douglas production function i ({1 > {2 ) = D{d1 {e2 where
| = i ({1 > {2 ) is output, {1 and {2 are inputs which have to be nonnegative,
and d and e are positive numbers.
For what values of d and e is i ({1 > {2 )
homogenous of degree 1 in {1 and {2 ?
1. all positive d and e=
2. positive d and e with d + e ? 1=
3. positive d and e with d + e = 1=
4. positive d and e with d +e A 1=
5. no positive values of d and e=
6. dont know.
Quiz 2A question 5
The cost function associated with the Cobb-Douglas production function i ({1 > {2 ) =
D{d1 {e2 is
 e
d
d
e
1
1
d d+e d d+e
f (z1 > z1 > |) = D d+e
+
z1d+e z2d+e | d+e =
e
e
For what values of d and e is f (z1 > z1 > |) homogeneous of degree 1 in output |?
1. all positive d and e=
2. positive d and e with d + e ? 1=
3. positive d and e with d + e = 1=
4. positive d and e with d +e A 1=
5. no positive values of d and e=
6. dont know.

3.3. THE CHAIN RULE FOR PARTIAL DERIVATIVES (ESSENTIAL TOPIC, QUESTIONS 2-3)25
Quiz 2A question 6
The cost function associated with the Cobb-Douglas production function i ({1 > {2 ) =
D{d1 {e2 is
 e
d
d
e
1
1
d d+e d d+e
d+e
f (z1 > z1 > |) = D
+
z1d+e z2d+e | d+e =
e
e
For what values of d and e is f (z1 > z1 > |) homogeneous of degree 1 in input
prices z1 and z2 ?
1. all positive d and e=
2. positive d and e with d + e ? 1=
3. positive d and e with d + e = 1=
4. positive d and e with d +e A 1=
5. no positive values of d and e=
6. dont know.
Quiz 2A question 7
Suppose that O (s> y> z) and N (s> y> z) maximize
si (N> O)  yN  zO
and
 (s> y> z) = si (N (s> y> z) > O (s> y> z))  yN (s> y> z)  zO (s> y> z) =
Which of the following statements are true?
Hint: you need not do any algebra or calculus to answer this question. You
may nd it helpful to think about what changes when (s> y> z) are multiplied
by 2.
1. None of O (s> y> z), N (s> y> z) and  (s> y> z) are homogeneous.
2. All of O (s> y> z), N (s> y> z) and  (s> y> z) are homogeneous of degree 0.
3. All of O (s> y> z), N (s> y> z) and  (s> y> z) are homogeneous of degree 1.
4. All of O (s> y> z), N (s> y> z) and  (s> y> z) are homogeneous of degree 2.
5. O (s> y> z) are N (s> y> z) are both homogeneous of degree 0 and  (s> y> z)
is homogeneous of degree 1.
6. O (s> y> z) are N (s> y> z) are both homogeneous of degree 1 and  (s> y> z)
is homogeneous of degree 0.
7. dont know

CHAPTER 3. QUIZ 2A FOR CLASS 2

26

3.4

The Chain Rule in Consumer Theory (essential topic questions 8 -11)

The functions

These questions are also on the chain rule; the functions chosen all come from
consumer theory. You will nd Microeconomics much easier if you have very
good knowledge of this material.
p = (s1 > s2 > ===sq ) prices.
p the amount of money the consumer has to spend.
x the consumers utility.
The functions are
{l (p>p) (l = 1> 2====q) uncompensated or Marshallian demand.
kl (p>x) (l = 1> 2====q) compensated or Hicksian demand.
h (p>x) the expenditure function.
The economics underlying this is discussed in H.R. Varian, Microeconomic
Analysis, chapter 7. These notes use the same notation as Varian. The
economics implies that there are relationships between these functions and relationships. These questions explore the mathematical consequences of those
relationships. You do not need the economics to do these questions. But you
may nd it helpful to look back at the mathematics when you come to do the
economics.
Quiz 2A question 8
The uncompensated demand function {l (p>p) and the compensated demand
function kl (p>x) are related by the identity that for all n
kn (p>x) = {n (p>p) when p = h (p> x) =
Use the chain rule to nd an expression for
derivatives of {l (p>p) and p = h (p> x) =

Ckl (p>x)
in terms of the partial
Csm

Which of the following expressions is correct?

3.4. THE CHAIN RULE IN CONSUMER THEORY (ESSENTIAL TOPIC QUESTIONS 8 -11)27
1.

C{l (p>p)
Ckl (p>x)
=
Csm
Csm

2.

Ckl (p>x)
C{l (p>p)
=
Csm
Csm

3.

Ckl (p>x)
C{l (p>p) C{l (p>p)
=
+
Csm
Csm
Cp

4.

Ckl (p>x)
C{l (p>p) C{l (p>p)
=

Csm
Csm
Cp

5.

C{l (p>p) C{l (p>p) Ch (p> x)

Ckl (p>x)
=
+
Csm
Csm
Cp
Csm

6.

Ckl (p>x)
C{l (p>p) C{l (p>p) Ch (p> x)
=

Csm
Csm
Cp
Csm

7. dont know
Quiz 2A question 9
You will learn that

Ch (p> x)
= km (p>x) =
Csm

Use this fact, together with your last answer to get an expression for
in terms of

Ckl (p>x)
, and other terms.
Csm

Which of the following equations is correct?

1.

C{l (p>p)
Ckl (p>x)
C{l (p>p)
=
+ km (p>x)
Csm
Csm
Cp

2.

C{l (p>p)
Ckl (p>x)
C{l (p>p)
=
+ {m (p>p)
Csm
Csm
Cp

3.

C{l (p>p)
Ckl (p>x)
C{l (p>p)
=
 km (p>x)
Csm
Csm
Cp

4.

Ckl (p>x)
C{l (p>p)
C{l (p>p)
=
 {m (p>p)
Csm
Csm
Cp

5.

Ckl (p>x)
C{l (p>p)
C{l (p>p)
=
+ 2km (p>x)
Csm
Csm
Cp

6.

C{l (p>p)
Ckl (p>x)
C{l (p>p)
=
+ 2{m (p>p)
Csm
Csm
Cp

7. dont know

C{l (p>p)
Csm

CHAPTER 3. QUIZ 2A FOR CLASS 2

28
Quiz 2A question 10

This is a question that you will be able to answer instantly or not at all. The
relationship that you derived for question 9 is named after an economist. Which
one?
1. Walras
2. Pareto
3. Slutsky
4. Edgeworth
5. Marshall
6. Hicks
7. dont know
Quiz 2A question 11
In general equilibrium theory the consumer has an endowment $ = ($ 1 > $ 2 > ===$ q )
of the q goods rather than a xed amount of money p to spend. The consumers
demand for good l as a function of prices p and endowment $ is
nl (p> $) = {l (p>p) when p = p0 $=
P
Remember p0 $ is vector notation for qo=1 so $ o = Use your answer to question
Cnl (p> $)
in terms of the partial
8 and the chain rule to nd an expressions for
Csm
derivatives of {l (p>p) and kl (p>x) =
Which of the following expressions are correct?

1.

Ckl (p>x)
C{l (p>p)
Cnl (p> $)
=
 ($ m  {m (p>p))
Csm
Csm
Cp

2.

Ckl (p>x)
C{l (p>p)
Cnl (p> $)
=
+ ($ m  {m (p>p))
Csm
Csm
Cp

3.

Cnl (p> $)
Ckl (p>x)
C{l (p>p)
=
 {m (p>p)
Csm
Csm
Cp

4.

Ckl (p>x)
C{l (p>p)
Cnl (p> $)
=
+ {m (p>p)
Csm
Csm
Cp

5.

C{l (p>p)
Cnl (p> $)
Ckl (p>x)
=
+ $m
Csm
Csm
Cp

3.5. SECOND DERIVATIVES (USEFUL TOPIC, QUESTION 12)

6.

29

Ckl (p>x)
C{l (p>p)
Cnl (p> $)
=
 $m
Csm
Csm
Cp

7. dont known

3.5

Second derivatives (useful topic, question 12)

Quiz 2A question 12
If

1@4

3@4

f (z1 > z1 > |) = z1 z2 |

nd the Hessian matrix
5 2
C f (z1 > z1 > |) C 2 f (z1 > z1 > |)
2
9
Cz1 Cz2
9 2 Cz1
7 C f (z1 > z1 > |) C 2 f (z1 > z1 > |)
Cz2 Cz1
Cz22
"
#
5@4 1@4
1@4 3@4
 34 z1 z2 | 34 z1 z2 |
1.
1@4 5@4
3 1@4 3@4
z2 |  34 z1 z2
4 z1
#
"
3 5@4 1@4
3 1@4 3@4
z
z
|

z
z
|
1
2
1
2
4
4
2.
1@4 3@4
3 1@4 5@4
 34 z1 z2 |
4 z1 z2
#
"
5@4 1@4
1@4 3@4
 34 z1 z2 | 34 z1 z2 |
3.
1@4 5@4
3 3@4 1@4
z2 |  34 z1 z2
4 z1
#
"
7@4 3@4
3
3 3@4 1@4
 16
z1 z2 | 16
z1 z2 |
4.
1@4 5@4
3 3@4 1@4
3
z2 |  16
z1 z2
16 z1

6
:
:=
8

5. dont know

3.5.1

The Implicit Function Theorem (more challenging

topic, but you need to know the result of question
13)

Quiz 2A question 13
The CES (constant elasticity of substitution) production function is
1@

i ({1 > {2 ) = [d1 {1 + d2 {2 ]

The isoquant graph shows {2 as a function of {1 and t dened implicitly by

1@

[d1 {1 + d2 {2 ]

= t=

CHAPTER 3. QUIZ 2A FOR CLASS 2

30

The slope of the isoquant is called by Varian technical rate of substitution

(TRS).
What is the TRS?

1. 

(1)

[d1 {1 + d2 {2 ]

(1)

[d1 {1 + d2 {2 ]

d2 {2
d1 {1

2.

(1)

[d1 {1 + d2 {2 ]

(1)

[d1 {1 + d2 {2 ]

d2 {2
d1 {1

3. 

4.

(1)

[d1 {1 + d2 {2 ]

(1)

[d1 {1 + d2 {2 ]

(1)

[d1 {1 + d2 {2 ]

d1 {1
d2 {2

(1)

5.

d1 {1

(1)

d2 {2

(1)

6. 

1


[d1 {1 + d2 {2 ]

d2 {2

d1 {1

(1)

d2 {2

7. dont know

1


1


(1)

d1 {1

1


1

1


1

1


Chapter 4

Quiz 2B for Class 2

4.1

Introduction

This quiz is about the basics of matrices, discussed in the chapter on matrices.
Everything in this quiz is essential, that you will need to have instant recall of
this material if you are to cope with econometrics.

4.2

Using Matrix Algebra: Questions 1-21

For questions 1 - 21

D=

G=

2 5
1 3

8 25
5 13


J=

M=


E=

1 10
2 1

6 10
1
2
6
1
10 2


H=

2 0
0 1



F=

6 2
K=
5 2
6
5
3 2
N=7 1 4 8
2 1


I =

3 5
1 2
6 5
2 2

1 0
L=
0 1
5
6
8 21
O = 7 6 17 8 =
5 13


Complete the tables below, circle the right answer and do the multiple choice
questions on WebCT. For example for question 1 D+E = F so click alternative
31

32

CHAPTER 4. QUIZ 2B FOR CLASS 2

3.C. You will often be able to answer these questions more quickly if you bear
in mind your answers to earlier questions and the facts about matrix algebra in
sections 1-8 of the chapter on matrices. Make notes explaining your answers
and be ready to discuss them in class.

4.3. SPECIAL MATRICES

4.3
4.3.1

33

Special Matrices
Notes

Section 3.6 of the linear algebra notes denes some special matrices that you
need to know about for questions 22-24

4.3.2

Quiz 2B question 22

Let

Click the correct statements

1. L has an inverse.
2. L is a diagonal matrix.

1
E 0
L=E
C 0
0

0
1
0
0

0
0
1
0

4
0
0 F
F
0 D
1

CHAPTER 4. QUIZ 2B FOR CLASS 2

34
3. L is a lower triangular matrix.
4. L is a symmetric matrix.
5. L is an orthonormal matrix.
6. L is an idempotent matrix.
7. L has rank 4

4.3.3

Quiz 2B question 23

Let

4
0=5 0 0=5
D=C 0 1 0 D
0=5 0 0=5
Click the correct statements
1. D has rank 3=
2. D has an inverse.
3. D is a lower triangular matrix.
4. D is a symmetric matrix.
5. D is an orthonormal matrix.
6. D is an idempotent matrix
7. D is a negative denite matrix.

4.3.4
4.3.5

Quiz 2B question 24

[ is a W n matrix with the following properties:

n ?W
udqn [ = n> that is there is no n vector z such that [z =0=
Click the statements that are correct for all such matrices.
1. [ has an inverse.
2. [ is a diagonal matrix.
3. [ is a lower triangular matrix.
4. [ is a symmetric matrix.
5. [ is an orthonormal matrix.
6. [ is an idempotent matrix