2026
INTERMEDIATE MICROECONOMICS
EXERCISE SOLUTIONS MANUAL
KOEN HANEGREEFS
VUB
,Table of Contents
About this Solutions Manual ..................................................................................................................... 1
Chapter 1 — Budget Constraint, Preferences & Utility (H2, H3, H4)............................................................. 2
Solutions — WPO 1 .............................................................................................................................. 2
Chapter 2 — Consumer Choice & Individual Demand (H5, H6) ................................................................... 9
Solutions — WPO 2 .............................................................................................................................. 9
Chapter 3 — Slutsky Equation & Market Demand (H8, H15)...................................................................... 11
Solutions — WPO 3 ............................................................................................................................ 11
Chapter 4 — Intertemporal Choice & Uncertainty (H10, H12) ................................................................... 22
Solutions — WPO 4 ............................................................................................................................ 22
Chapter 5 — Technology & Profit Maximisation (H19, H20) ....................................................................... 26
Solutions — WPO 5 ............................................................................................................................ 26
Chapter 6 — Cost Minimisation & Cost Curves (H21, H22) ....................................................................... 30
Solutions — WPO 6 ............................................................................................................................ 30
Chapter 7 — Firm Supply & Industry Supply (H23, H24) ............................................................................ 36
Solutions — WPO 7 ............................................................................................................................ 36
Chapter 9 — Monopoly & Monopoly Behaviour (H25, H26) ....................................................................... 41
Solutions — WPO 9 ............................................................................................................................ 41
Chapter 10 — Oligopoly & Game Theory (H28, H29, H30) ......................................................................... 49
Solutions — WPO 10 ........................................................................................................................... 49
About this Solutions Manual
This file contains the full worked solutions to every WPO exercise for chapters 1 to 10 of Intermediate
Microeconomics (VUB, Prof. Nikolas Vander Vennet). Use it in conjunction with the Study Document.
1
,Chapter 1 — Budget Constraint, Preferences & Utility (H2, H3, H4)
Solutions — WPO 1
Course: Intermediate Microeconomics (Varian) — VUB
Source: Exercises_1 H2, 3, 4.pdf
Instructor: Atanas Djondjourov
Chapter 2: Budget Constraint
Exercise 2.1
Solution:
Input: x₁ = 100 units; x₂ = 50 units; p₁ = €2; p₁’ = €3; p₂ = €4
Budget constraint: m = p₁ · x₁ + p₂ · x₂
• Initial prices: m = 2 · 100 + 50 · 4 = €400
• New prices: m = 3 · 100 + 50 · 4 = €500
Answer: Jan’s income should increase by €100.
Exercise 2.2
Solution:
Input: x₁ = 8, x₂ = 8; x₁’ = 10, x₂’ = 4; p₁ = €0.50
Budget constraint: m = p₁ · x₁ + p₂ · x₂
Both bundles (8, 8) and (10, 4) are on the budget line: - m = 8 · 0.5 + 8 · p₂ = 6 - m = 10 · 0.5 + 4 · p₂
Solving: m = 6; p₂ = 0.25
Budget line equation: 6 = 0.5x₁ + 0.25x₂
Intercepts: - x₁ = 6/0.5 = 12 - x₂ = 6/0.25 = 24
Answer: Amy gets €6 of pocket money per week.
2
, Exercise 2.3
Solution A:
Input: m = 60,000; p₁ (x₁ ≤ 1,000 m³) = €15; p₁ (x₁ > 1,000 m³) = €10; p₂ = €10
Budget constraints: - If x₁ ≤ 1,000: 60,000 = 15x₁ + 10x₂ - If x₁ > 1,000: 60,000 = 15 · 1,000 + 10(x₁ - 1,000) +
10x₂
So: 55,000 = 10x₁ + 10x₂
Key points: - When x₁ = 0: x₂ = 6,000 - When x₁ = 1,000: x₂ = 4,500 (kink point) - When x₂ = 0: x₁ = 5,500
Answer: The budget line has a kink at (1,000, 4,500).
Solution B:
Input: Same as (a) but with €6,000 connection costs
Budget constraints: - If x₁ ≤ 1,000: 60,000 = 6,000 + 15x₁ + 10x₂
So: 54,000 = 15x₁ + 10x₂ - If x₁ > 1,000: 60,000 = 6,000 + 15 · 1,000 + 10(x₁ - 1,000) + 10x₂
So: 49,000 = 10x₁ + 10x₂
Key points: - When x₁ = 0: x₂ = 5,400 - When x₂ = 0: x₁ = 4,900
Answer: The budget line shifts down (parallel shift) due to the fixed connection cost.
Exercise 2.4
Solution 1: Unconditional lump-sum subsidy
Input: m = 60,000; subsidy = €10,000
Budget constraint: 60,000 + 10,000 = C + O
So: 70,000 = C + O
Answer: The budget line shifts outward uniformly. Maximum C = 70,000 or maximum O = 70,000.
Solution 2: Conditional subsidy (minimum purchase requirement)
Input: m = 60,000; subsidy = €10,000 if C ≥ €30,000
Budget constraints: - When C < €30,000: 60,000 = C + O - When C ≥ €30,000: 70,000 = C + O
Key points: - Kink point at C = 30,000, O = 30,000 - Maximum C without subsidy = 60,000 - Maximum C with
subsidy = 70,000
Answer: Non-convex budget set due to discontinuity at C = €30,000.
3
INTERMEDIATE MICROECONOMICS
EXERCISE SOLUTIONS MANUAL
KOEN HANEGREEFS
VUB
,Table of Contents
About this Solutions Manual ..................................................................................................................... 1
Chapter 1 — Budget Constraint, Preferences & Utility (H2, H3, H4)............................................................. 2
Solutions — WPO 1 .............................................................................................................................. 2
Chapter 2 — Consumer Choice & Individual Demand (H5, H6) ................................................................... 9
Solutions — WPO 2 .............................................................................................................................. 9
Chapter 3 — Slutsky Equation & Market Demand (H8, H15)...................................................................... 11
Solutions — WPO 3 ............................................................................................................................ 11
Chapter 4 — Intertemporal Choice & Uncertainty (H10, H12) ................................................................... 22
Solutions — WPO 4 ............................................................................................................................ 22
Chapter 5 — Technology & Profit Maximisation (H19, H20) ....................................................................... 26
Solutions — WPO 5 ............................................................................................................................ 26
Chapter 6 — Cost Minimisation & Cost Curves (H21, H22) ....................................................................... 30
Solutions — WPO 6 ............................................................................................................................ 30
Chapter 7 — Firm Supply & Industry Supply (H23, H24) ............................................................................ 36
Solutions — WPO 7 ............................................................................................................................ 36
Chapter 9 — Monopoly & Monopoly Behaviour (H25, H26) ....................................................................... 41
Solutions — WPO 9 ............................................................................................................................ 41
Chapter 10 — Oligopoly & Game Theory (H28, H29, H30) ......................................................................... 49
Solutions — WPO 10 ........................................................................................................................... 49
About this Solutions Manual
This file contains the full worked solutions to every WPO exercise for chapters 1 to 10 of Intermediate
Microeconomics (VUB, Prof. Nikolas Vander Vennet). Use it in conjunction with the Study Document.
1
,Chapter 1 — Budget Constraint, Preferences & Utility (H2, H3, H4)
Solutions — WPO 1
Course: Intermediate Microeconomics (Varian) — VUB
Source: Exercises_1 H2, 3, 4.pdf
Instructor: Atanas Djondjourov
Chapter 2: Budget Constraint
Exercise 2.1
Solution:
Input: x₁ = 100 units; x₂ = 50 units; p₁ = €2; p₁’ = €3; p₂ = €4
Budget constraint: m = p₁ · x₁ + p₂ · x₂
• Initial prices: m = 2 · 100 + 50 · 4 = €400
• New prices: m = 3 · 100 + 50 · 4 = €500
Answer: Jan’s income should increase by €100.
Exercise 2.2
Solution:
Input: x₁ = 8, x₂ = 8; x₁’ = 10, x₂’ = 4; p₁ = €0.50
Budget constraint: m = p₁ · x₁ + p₂ · x₂
Both bundles (8, 8) and (10, 4) are on the budget line: - m = 8 · 0.5 + 8 · p₂ = 6 - m = 10 · 0.5 + 4 · p₂
Solving: m = 6; p₂ = 0.25
Budget line equation: 6 = 0.5x₁ + 0.25x₂
Intercepts: - x₁ = 6/0.5 = 12 - x₂ = 6/0.25 = 24
Answer: Amy gets €6 of pocket money per week.
2
, Exercise 2.3
Solution A:
Input: m = 60,000; p₁ (x₁ ≤ 1,000 m³) = €15; p₁ (x₁ > 1,000 m³) = €10; p₂ = €10
Budget constraints: - If x₁ ≤ 1,000: 60,000 = 15x₁ + 10x₂ - If x₁ > 1,000: 60,000 = 15 · 1,000 + 10(x₁ - 1,000) +
10x₂
So: 55,000 = 10x₁ + 10x₂
Key points: - When x₁ = 0: x₂ = 6,000 - When x₁ = 1,000: x₂ = 4,500 (kink point) - When x₂ = 0: x₁ = 5,500
Answer: The budget line has a kink at (1,000, 4,500).
Solution B:
Input: Same as (a) but with €6,000 connection costs
Budget constraints: - If x₁ ≤ 1,000: 60,000 = 6,000 + 15x₁ + 10x₂
So: 54,000 = 15x₁ + 10x₂ - If x₁ > 1,000: 60,000 = 6,000 + 15 · 1,000 + 10(x₁ - 1,000) + 10x₂
So: 49,000 = 10x₁ + 10x₂
Key points: - When x₁ = 0: x₂ = 5,400 - When x₂ = 0: x₁ = 4,900
Answer: The budget line shifts down (parallel shift) due to the fixed connection cost.
Exercise 2.4
Solution 1: Unconditional lump-sum subsidy
Input: m = 60,000; subsidy = €10,000
Budget constraint: 60,000 + 10,000 = C + O
So: 70,000 = C + O
Answer: The budget line shifts outward uniformly. Maximum C = 70,000 or maximum O = 70,000.
Solution 2: Conditional subsidy (minimum purchase requirement)
Input: m = 60,000; subsidy = €10,000 if C ≥ €30,000
Budget constraints: - When C < €30,000: 60,000 = C + O - When C ≥ €30,000: 70,000 = C + O
Key points: - Kink point at C = 30,000, O = 30,000 - Maximum C without subsidy = 60,000 - Maximum C with
subsidy = 70,000
Answer: Non-convex budget set due to discontinuity at C = €30,000.
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