« previous next »

Author Question: Lewis has preferences given by the Cobb-Douglas utility function U(q1,q2 ) = q1aq21-a, where a > ... (Read 61 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?

A serious new warning has been established for pregnant women against taking ACE inhibitors during pregnancy. In the study, the risk of major birth defects in children whose mothers took ACE inhibitors during the first trimester was nearly three times higher than in children whose mothers didn't take ACE inhibitors. Physicians can prescribe alternative medications for pregnant women who have symptoms of high blood pressure.

Did you know?

Children of people with alcoholism are more inclined to drink alcohol or use hard drugs. In fact, they are 400 times more likely to use hard drugs than those who do not have a family history of alcohol addiction.

Did you know?

About 80% of major fungal systemic infections are due to Candida albicans. Another form, Candida peritonitis, occurs most often in postoperative patients. A rare disease, Candida meningitis, may follow leukemia, kidney transplant, other immunosuppressed factors, or when suffering from Candida septicemia.

Did you know?

Vaccines cause herd immunity. If the majority of people in a community have been vaccinated against a disease, an unvaccinated person is less likely to get the disease since others are less likely to become sick from it and spread the disease.

Did you know?

Many people have small pouches in their colons that bulge outward through weak spots. Each pouch is called a diverticulum. About 10% of Americans older than age 40 years have diverticulosis, which, when the pouches become infected or inflamed, is called diverticulitis. The main cause of diverticular disease is a low-fiber diet.

Jacob, Monod, and Pardee's hypothesis for the function of the lacI region Jacob, Monod, and Pardee's hypothesis for the function of the lacI region
Negative control of a repressible set of genes: function of the trp repressor and corepressor in reg Negative control of a repressible set of genes: function of the trp repressor and corepressor in reg
Examples of four different types of cells from the body. Although each cell has a cell membrane, nuc Examples of four different types of cells from the body. Although each cell has a cell membrane, nuc
How to evaluate and sketch a piecewise function (Part 1) How to evaluate and sketch a piecewise function (Part 1)
Derivative of Reciprocal Trig Function Derivative of Reciprocal Trig Function
Structure and function of human teeth. Structure and function of human teeth.
Video: Gas exchange - partial pressure, locations, external and internal respiration

For a complete list of videos, visit our video library