Problem Set # 4
1. Professors Smith and Jones are going to produce a new economics textbook. As true
economists, they have laid out the production function for the book: q = SJ where
q = the number of finished book pages
S = number of working hours spent
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Answer Sheet, Problem Set # 3
1.a) Melvyn always buys the cheaper of the two goods. This implies that he has perfectsubstitutes preferences U C , P C P with . In this case, chips are cheaper, so
m
pC
Melvyn will spend all his money buying chips, which w
Problem Set # 3
1. Melvyn likes to snack on peanuts and potato chips. He has $5 to spend and he always buys the
cheaper of the two.
a) If the price of a bag of peanuts is $1.00 and the price of a bag of potato chips is $0.50, what
will Melvyn buy? Illustr
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Answer Sheet, Problem Set # 4
1.a) Smiths input is fixed at 900 hours, which means that output is now a function of the only
remaining variable input, Jones labor. We can invert the production function to get the required
input as a function of the quan