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Suppose the production function is given by Q(L,K) = L 4/3
K 4
1
. Assuming capital is fixed,
find APL and MPL.
Air conditioners (AC's) follow the law of demand. If price of AC's fall, what happens to total revenue from sales of AC's?
U = RT
Write down the budget constraint (budget line equation) for this consumer.
Determine the quantities that the consumer should consume of each of the two products.
Calculate the value of the lagrangian multiplier.
Derive the demand function for Red Meat.
Derive the demand function for Tomatoes.
if the demand for steel increases and, at the same time, improvements in technology lower steel production costs, what would happen to the new equilibrium price and quantity?
Price increase, quantity increase
Price increase, indeterminate quantity change
Price decrease, quantity increase
Indeterminate price change, quantity increase
Indeterminate price change, indeterminate quantity change
Suppose a consumer consuming two commodities X and Y has the following utility function U= 10X0.4Y0.6. If price of good X and Y are 2 and 3 respectively and income constraint is Birr 50, then find
Find quantities of X and Y which maximize utility
Show how the rise in income to Birr 100 will affect the quantities of X and Y
Assume a hypothetical consumer consumes orange and banana. The price of orange is 2 and price of banana is 4 and the consumer budget is birr 20 for the two goods. Where: QX is quantity of orange, QY is quantity of banana and TUX and TUY is total utility from consuming orange and banana respectively.
Orange, Price=2birr
Banana, Price=4birr
Qx
TUx
MUx
MUx/Px
Qy
TUy
MUy
MUy/Py
1
6
1
6
2
10
2
22
3
12
3
32
4
13
4
40
5
13
5
45
6
11
6
48
Based on the given information, answer the following questions.
Compute the marginal utility of the of the two goods
At what amounts consumption does diminishing marginal utility starts to occur for the two goods?
Determine the quantities of the two goods that the consumer should buy in order to maximize his total utility?
When will the consumer be at equilibrium?
Supose the consumer`s utility function is given by U= 10X1/2Y1/4. Compute both MRSxy and MRSyx. Is there any difference between the two?
In order to maximize surplus in a market, which of the following must be true?
All costs and benefits to society are internalized.
All goods are common resources.
Quantity supplied is greater than quantity demanded.
Marginal private benefit equals marginal private cost.
None of the above
Explain clearly with the aid of a graph the income and substitution effect of a price fall for a normal good
