Exam308 - Lyon Econ 7140 Third Exam April 3 2008 1 For the...

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
Lyon Econ 7140 April 3, 2008 Third Exam 1. For the utility functions ( ) x x U ln = and ( ) x x V = a. Show they are CRRA utility functions. Explain. b. TFU, At any level of x , U exhibits more risk aversion than does V . Remember that the explanation is the important part. 2. The profit function is ( ) wx x pq = π where q is a strictly concave production function and x , a scalar, is the only input. The hire-price of x is a stochastic variable with density function ( ) w φ and mean w . Individual A maximizes expected profits and Individual B maximizes expected utility. a. Identify the FONC for Individual A. Show your work and explain everything. b. Now work with Individual B where ( ) u is strictly concave. i. Identify the FONC. Show your work and explain everything. ii. Show that the FONC can be written () () ( ) () ( ) ( ) () = b a b a dw w w wx x pq u dw w x q p wx x pq φ * * * * * iii. Subtract from both sides () ()
Background image of page 1
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

Ask a homework question - tutors are online