« previous next »

Author Question: Lewis has preferences given by the Cobb-Douglas utility function U(q1,q2 ) = q1aq21-a, where a > ... (Read 62 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?

In Eastern Europe and Russia, interferon is administered intranasally in varied doses for the common cold and influenza. It is claimed that this treatment can lower the risk of infection by as much as 60–70%.

Did you know?

Fatal fungal infections may be able to resist newer antifungal drugs. Globally, fungal infections are often fatal due to the lack of access to multiple antifungals, which may be required to be utilized in combination. Single antifungals may not be enough to stop a fungal infection from causing the death of a patient.

Did you know?

The familiar sounds of your heart are made by the heart's valves as they open and close.

Did you know?

The modern decimal position system was the invention of the Hindus (around 800 AD), involving the placing of numerals to indicate their value (units, tens, hundreds, and so on).

Did you know?

Approximately one in three babies in the United States is now delivered by cesarean section. The number of cesarean sections in the United States has risen 46% since 1996.

A closer look at the structure and function of photosystem II A closer look at the structure and function of photosystem II
Multiple sclerosis (MS). (a) A disease characterized by the gradual development of small areas of ha Multiple sclerosis (MS). (a) A disease characterized by the gradual development of small areas of ha
How to find the anti-derivative of a function (Part 2) How to find the anti-derivative of a function (Part 2)
How to vertically shift a sinusoidal function (y=a*sin⁡b(x−c)+d) How to vertically shift a sinusoidal function (y=a*sin⁡b(x−c)+d)
Integral of function p2 Integral of function p2
State the transformations on the function f(x)= 4sin(x-pi)-2 and then graph two cycles below. State the transformations on the function f(x)= 4sin(x-pi)-2 and then graph two cycles below.
Video: Metaphase I Animation

For a complete list of videos, visit our video library