hw05_2008 - UNC Wilmington Department of Economics and...

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UNC Wilmington ECN 321 Department of Economics and Finance Dr. Chris Dumas Homework 5 (due Friday, October 24, 5pm) Solve the following optimization problems. SET UP THE PROBLEMS IN THE APPROPRIATE FORMAT. SHOW YOUR WORK. 1) Suppose that watching a sufficient amount of afternoon television would convince you that Oprah’s satisfaction (U) depends on the number of celebrity movie stars (S) per year and the number of free gifts (G) per year given to her studio audience in the following way: U = 50 + 30S – (1/4)S 2 + 300G – (1/10)G 2 . Since Oprah has over $1 billion in the bank, let’s assume that budget constraints are irrelevant. On the other hand, as her utility function indicates, if either S or G grows too high, either can become trite and boring, decreasing her satisfaction, and so she doesn’t want an infinite amount of either. Help Oprah find the optimal numbers of S and G. SHOW YOUR WORK! 2) Suppose Ferris Bueller’s satisfaction today (U) depends on the number of miles driven
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This note was uploaded on 10/22/2009 for the course ECN 321 taught by Professor Dumas during the Fall '08 term at University of North Carolina Wilmington.

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