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ECON 2050 SEMESTER
Quiz 2 Due on Blackboard on Friday 27 October 2023 at 16:00 Question 1 (15 marks) Prove that S = { (x, y) ∈ R2 : 2x2 − y ≤ 3} is a convex set by directly verifying that S satisfies the definition of a convex set. Question 2 (15 marks) Let D be a convex subset of Rn. If f : D → R is a concave function and k ∈ R, then the upper contour set S = {x ∈ D : f(x) ≥ k} is a convex set. Using this theorem, show that if a ∈ [−1, 1] and b ∈ R, then the following set M , is convex. M = {(x, y, z) ∈ (0, 2)× R2 : lnx− 2y2 − axy ≥ 0, x+ by + z ≤ 0} Question 3 (15 marks) Consider the function f : R2 → R, (x, y) 7→ − 6x4 − 34y2 + 6xy. Find all critical points of f and classify each critical point as A) a local maximum, B) a local minimum or C) a saddle point. Show each of your steps. Question 4 (20 marks) For all possible values of a and c, solve the constrained maximization problem max (x,y,z)∈R3 2xy + 2xz + 2yz s.t. x2 + y2 = 8, ax− ay + z = c using the Lagrange approach. You may assume that the constraint set is compact without proof. Explain each of your steps. 1 ECON 2050 SEMESTER 2 2023 Question 5 (20 marks) Consider the following maximization problem: max (x,y)∈R2 −(x+ 1)2 − (y − 4)2 s.t. x+ (y − 3)3 ≤ 0, y ≥ 2x2, x ≥ 0, y ≥ 0 You may use without proof the fact that this problem has a solution. (a) Determine and explain whether any points of the constraint set violate the non- degenerate constraint qualification of the Kuhn-Tucker theorem. (7 marks) (b) Solve this problem by applying the Kuhn-Tucker theorem. (13 marks) Question 6 (15 marks) Consider the following maximization problem: max (x,y)∈R2 −x2 − y2 s.t. − x− y ≤ −4, y + 2x ≤ 5 (a) Can you apply the Extreme Value Theorem to conclude that this problem does have a solution? Explain why or why not. (2 marks) (b) Is the objective function convex and/or concave? Prove your answer. (2 marks) (c) Is the constraint set convex? You do not need to prove your answer. (1 mark) (d) Solve this problem by applying the Kuhn-Tucker theorem. Carefully explain each of your steps. You may use without proof the fact that all points of the constraint set satisfy the non-degenerate constraint qualification. (8 marks) (e) Without solving any other maximization problem, estimate whether the function f : R2 → R, (x, y) 7→ − x2 − y2. attains a higher value in the set C1 = {(x, y) ∈ R2 : −x−y ≤ −3, y+2x ≤ 5} or in the set C2 = {(x, y) ∈ R2 : −x−y ≤ −4, y+2x ≤ 6}. (2 marks)