« previous next »

Author Question: Lewis has preferences given by the Cobb-Douglas utility function U(q1,q2 ) = q1aq21-a, where a > ... (Read 103 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?

About 60% of newborn infants in the United States are jaundiced; that is, they look yellow. Kernicterus is a form of brain damage caused by excessive jaundice. When babies begin to be affected by excessive jaundice and begin to have brain damage, they become excessively lethargic.

Did you know?

According to the American College of Allergy, Asthma & Immunology, more than 50 million Americans have some kind of food allergy. Food allergies affect between 4 and 6% of children, and 4% of adults, according to the CDC. The most common food allergies include shellfish, peanuts, walnuts, fish, eggs, milk, and soy.

Did you know?

By definition, when a medication is administered intravenously, its bioavailability is 100%.

Did you know?

In 2012, nearly 24 milliion Americans, aged 12 and older, had abused an illicit drug, according to the National Institute on Drug Abuse (NIDA).

Did you know?

When taking monoamine oxidase inhibitors, people should avoid a variety of foods, which include alcoholic beverages, bean curd, broad (fava) bean pods, cheese, fish, ginseng, protein extracts, meat, sauerkraut, shrimp paste, soups, and yeast.

Structure and function of the Na+/K+ pump. Structure and function of the Na+/K+ pump.
Structure and basic function of a typical vertebrate neuron and associated glial cells. Structure and basic function of a typical vertebrate neuron and associated glial cells.
Immunoglobulin Function Immunoglobulin Function
How to sketch a graph of a function using calculus only (Part 3) How to sketch a graph of a function using calculus only (Part 3)
Look at the graph function shown belowPlea Look at the graph function shown belowPlea
Consider the following Lagrangian function: Z(I1,K2,λ) = F(K1,L1) - I1 - w1L1 ... Consider the following Lagrangian function: Z(I1,K2,λ) = F(K1,L1) - I1 - w1L1 ...
Video: Role of the respiratory system - effect of altered ventilation rates

For a complete list of videos, visit our video library