« previous next »

Author Question: Lewis has preferences given by the Cobb-Douglas utility function U(q1,q2 ) = q1aq21-a, where a > ... (Read 107 times)

rl

  • Hero Member
  • *****
  • Posts: 579
on: Jul 1, 2018
Lewis has preferences given by the Cobb-Douglas utility function U(q1,q2 ) = q1aq21-a, where a > 0. Show that Lewis's total amount spent on each good, does not change with the prices.
 
  What will be an ideal response?

Question 2

The Cobb-Douglas production function for a beer manufacturer is q=1.52L0.6K0.4. If we assume that the firm's capital is fixed at 250 units and the rental rate of capital is 5 per unit, then average fixed cost is
 
  A) 1250.
  B) 1250/q.
  C) 1.52L0.6(250)0.4.
  D) Unable to determine with information given.


Jbrasil

  • Sr. Member
  • ****
  • Posts: 337
Reply #1 on: Jul 1, 2018
Answer to Question 1

The demand equations are
q1 = aY/p1 and q2 = (1-a)Y/p2
The total expenditure on q1 is p1q1 = aY and the total expenditure on q2 is p2q2 = (1-a)Y. Thus, the total expenditures are not a function of the price.

Answer to Question 2

B


Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question
« previous next »
 

Did you know?

According to research, pregnant women tend to eat more if carrying a baby boy. Male fetuses may secrete a chemical that stimulates their mothers to step up her energy intake.

Did you know?

The calories found in one piece of cherry cheesecake could light a 60-watt light bulb for 1.5 hours.

Did you know?

As the western states of America were settled, pioneers often had to drink rancid water from ponds and other sources. This often resulted in chronic diarrhea, causing many cases of dehydration and death that could have been avoided if clean water had been available.

Did you know?

Cucumber slices relieve headaches by tightening blood vessels, reducing blood flow to the area, and relieving pressure.

Did you know?

According to the CDC, approximately 31.7% of the U.S. population has high low-density lipoprotein (LDL) or "bad cholesterol" levels.

The “Flat Head” (Chinook) Indians acquired their name through shaping in infancy, as shown in a diag The “Flat Head” (Chinook) Indians acquired their name through shaping in infancy, as shown in a diag
How to plot a sine function containing an amplitude and phase shift (Question 1 of 3) How to plot a sine function containing an amplitude and phase shift (Question 1 of 3)
How to evaluate a function containing the constant k How to evaluate a function containing the constant k
Histone and pol II CTD modifications as a function of gene position Histone and pol II CTD modifications as a function of gene position
Integral of function p1 Integral of function p1
Structure and function of the gills of a bony fish. Structure and function of the gills of a bony fish.
Video: Mutations and translation

For a complete list of videos, visit our video library