401_s09_hw4a - Eco 401, J. Sandford, spring 2009 February...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: Eco 401, J. Sandford, spring 2009 February 26, 2009 Homework 4 Answers Problem 1 Nadia likes spare ribs, R, and fired chicken, C. Her utility function is U = 10 R 2 C (1) Her marginal utilities are MU R = 20 RC and MU C = 10 R 2 . Her weekly income is $90, which she spends on only ribs and chicken. a. If she pays $10 for a slab of ribs and $5 for a chicken, what is her optimal consumption bundle? Show her budget line, indifference curve, and optimal bundle, e 1 in a diagram. C * = 6, R * = 6 b. Suppose the price of a chicken doubles to $10. How does her optimal consumption of chicken and ribs change? Show her new budget line and optimal bundle, e 2 , in your diagram. C * = 3, R * = 6 c. Solve for Nadias demand for chicken when the price of a chicken is p c , for any p c . C * = 30 p c Problem 2 The cost function for Johns shoe repair is c ( q ) = 100 + 10 q- q 2 + 1 3 q 3 , so that marginal cost is c ( q ) = 10- 2 q + q 2 . Shoe repair is a perfectly competitive industry. a. Suppose the price of shoes is $80. Solve for Johns profit-maximizing quantity of shoes repaired. What is Johns profit in this case?...
View Full Document

This note was uploaded on 10/25/2010 for the course ECONOMICS C30.-0001- taught by Professor Bowmaker during the Fall '10 term at NYU.

Page1 / 3

401_s09_hw4a - Eco 401, J. Sandford, spring 2009 February...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online