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7/18/2019 Problem Set #1 http://slidepdf.com/reader/full/problem-set-1-56d63f19a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 !"# !!!"# !"#$%$&' !"# !!!"#  ! !" !!! ! !"!!" !"#$%&' * +, !"#"$%& ()&&* +,,&*, -."/.#.*.&, "#$% &'()*)))+)) ,#-. /0 "#1-2#3 &'))*)))+)) /04502678 &9)*)))+)) :52#-05. ;#70-0<$ &=>)*)))+)) ?52 ,,@; &>9)*)))+)) A%#75%63.57B$ ;CD-28 &9>)*)))+)) E62#3 F$$52$ &9>)*)))+)) E62#3 G-#H-3-2-5$ @ A%#75%63.57B$ ;CD-28 &9>)*)))+))

Problem Set #1

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Princeton ECO 363

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Page 1: Problem Set #1

7/18/2019 Problem Set #1

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!"#$ &"'()*+,-./0+1 &+2 345 6.-7.-"2+ 8(9"9#+

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": 4;<=<<</: >4:?@7+- A$"-+#: BCDEFG H I+2 (9#.1+ J D92+-+A2 J 2"K+A J )+7-+#("2(.9 L "1.-2(M"2(.9BCDEFG H 4?<=<<< J < J N<=<<< J ?<=<<< H O?<=<<<BCDEFG H >O?<=<<<

BCDEFG (A "9 "##-P"0 "##.P92(9* 7-.KQ R.- #"A$ R0.S 2. 2$+ R(-1: D2 (A PA+RP0 /+#"PA+(2 (A (9)+7+9)+92 .R #"7(2"0 A2-P#2P-+ "9) 9.9T#"A$ #$"-*+A= $+9#+ "00.S(9* R.- "/+22+- #.17"-(A.9 .R .7+-"2(9* 7-.R(2"/(0(2Q "#-.AA R(-1A:

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#"A$ .P2R0.S (9 #"A$ R-.1 R(9"9#(9* "#2('(2(+A: &(9#+ 2$+ #"A$ R0.S A2"2+1+92 A$.SA2$+-+ S"A 9. 9+2 #"A$ R0.S R-.1 R(9"9#(9*= )('()+9)A #.P0) .90Q $"'+ /++9 7"() (R2$+-+ S"A "9 +UP"0 "9) .RRA+22(9* (9R0.S R-.1 "#2('(2(+A #0"AA(R(+) "A #"A$ R0.S R-.1R(9"9#(9* "#2('(2(+A: &(9#+ 9. )+/2 (A 7-+A+92 .9 2$+ /"0"9#+ A$++2 "9) 2$+ UP+A2(.9A2(7P0"2+A 2$"2 9. +UP(2Q S"A (AAP+)= 2$+-+ S+-+ 9. #"A$ (9R0.SA R-.1 R(9"9#(9*"#2('(2(+A: V+9#+= 2$+ #.17"9Q )() 9.2 7"Q .P2 )('()+9)A:

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Page 2: Problem Set #1

7/18/2019 Problem Set #1

http://slidepdf.com/reader/full/problem-set-1-56d63f19a2474 2/3

 

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/: E$+ #.17"9QWA 9+2 (9#.1+ )+#0(9+A /Q >X<=<<<: E$(A (A /+#"PA+ 2$+ 1"-YT).S9 .R2$+ "AA+2 R-.1 >4<<=<<< 2. >< A$.SA P7 .9 2$+ (9#.1+ A2"2+1+92 "A " 0.AA .9)(A7.A"0 .R "AA+2A= )+#-+"A(9* 7-+2"K (9#.1+ /Q >4<<=<<<: G 0.S+- 7-+T2"K (9#.1+"0A. (9#P-A " 0.S+- 2"K +K7+9A+= $.S+'+-: E$+ 2"K +K7+9A+ )+#0(9+A /Q >Z<=<<<[>4<<=<<< K Z<\ #.-7.-"2+ 2"K -"2+]: V+9#+ 2$+ .'+-"00 #$"9*+ 2. 9+2 (9#.1+ (AT4<<=<<< J Z<=<<< H TX<=<<<

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