{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

DiagnosticTest05-1

# DiagnosticTest05-1 - John Riley corrected 23 September 2006...

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

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

View Full Document
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: John Riley corrected 23 September 2006 Econ 200 Diagnostic Test Summer 2005 Time allowed: ninety (90) minutes. Attempt three (3) questions only. 1. Profit maximization A firm sells two products. The cost of producing 1 2 ( , ) q q q = is 2 1 2 ( ) ( ) C q q q = + . The demand price functions are 1 1 1 2 2 2 ( ) 2 , ( ) 40 p q a q p q q = - =- . (a) If 20 a = show that the profit-maximizing output is (0,10) q = (b) Show that for all smaller a the profit-maximizing choice is still (0,10) q = . (c) Show that for all 20 a > the profit-maximizing output of product 1 is strictly positive. 2. Consumer choice Alex has utility function 2 1 2 ( ) , , , A U x x x x α β α β + = ∈ > R . His income is I and the price vector is p . (a) Explain why his utility maximizing choice is the solution to the following problem. 1 2 { ln ln | 0, 0} x Max x x x I p x α β + ≥- ⋅ ≥ (b) Hence or otherwise solve for his utility maximizing consumption vector....
View Full Document

{[ snackBarMessage ]}

### Page1 / 2

DiagnosticTest05-1 - John Riley corrected 23 September 2006...

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

View Full Document
Ask a homework question - tutors are online