Professional Documents
Culture Documents
Solutions
2.1
U
= 8x ,
x
U
= 6y
y
b.
8, 12
c.
dU = x dx + y dy = 8x dx + 6y dy
d.
dy
for dU = 0 8x dx + 6 y dy = 0
dx
dy
8x
4x
=
=
dx
6y
3y
y=2
U = 4 1 + 3 4 = 16
e.
x = 1,
f.
dy
4(1)
=
= 2/3
dx
3(2)
g.
2.2
a.
b.
2.3
*
q = 10
2
* = 2(10 ) + 40(10) 100 = 100
2
d
= 4 so profits are maximized
2
dq
dR
= 70 2q
dq
dC
MC =
= 2q + 30
dq
so q* = 10 obeys MR = MC = 50.
Substitution: y 1 x so f xy x x 2
c.
dy
4x
=
.
dx
3y
MR =
f
= 1 2x = 0
x
= y =0
x
= x =0
y
2.4
2.5
so, x = y.
using the constraint gives x y 0.5, xy 0.25
Setting up the Lagrangian: x y (0.25 xy ) .
1 y
x
1 x
y
So, x = y. Using the constraint gives xy x 2 0.25, x y 0.5 .
f (t ) 0.5gt 2 40t
a.
df
40
= g t + 40 = 0, t *
.
dt
g
b.
c.
f
1
= ( t * )2 depends on g because t* depends on g.
g
2
f
40
800
= 0.5(t * )2 0.5( ) 2
.
2
g
g
g
800 32 25, 800 32.1 24.92 a reduction of .08. Notice that
d.
800 g 2 800 32 2 0.8 so a 0.1 increase in g could be predicted to
reduce height by 0.08 from the envelope theorem.
a. This is the volume of a rectangular solid made from a piece of metal which is x
by 3x
with the defined corner squares removed.
so
2.6
b.
V
3x 2 16 xt 12t 2 0 . Applying the quadratic formula to this expression
t
2.7
1 0
x1
conditions:
5
0
x2 x2
k x1 x2 0
a. TC = MCdq ( q 1)dq
q2
q2
q
qo C
qC
2
2
pq TC ( q ) 15 * 14 (
14 2
14 C ) 0
2
98 C 0
C 98 Fixed Costs
c. If p=20, q = 19. Following the same steps as in b., and using C=98, we get
pq TC (q ) 20 *19 (
19 2
19 98) 82.5
2
pq (
( p 1) 2
q2
( p 1) 2
q 98) p ( p 1)
( p 1) 98
98
2
2
2
20
p2
p 82.5
ii. (20) (15) ( p 1)dp
2
15
15
The 2 approaches above demonstrate the envelope theorem. In the first case,
we optimize q first and then substitute it into the profit function. In the second
case, we directly vary the parameter (i.e., p) and essentially move along the
firms supply curve.
Analytical Problems
2.9
2.10
< 0.
f12 f 21 x1
x2
> 0.
If y = c = x1 x 2
x2 = c
c.
1/
x1
f 12 = ( 1) ( ) ( 1) x12
2
22
= (1 ) x12
2.11
2 2
x2
2 2
x2
2 x12
2
c.
2.12
Taylor Approximations
a.
The RHS above is the equation of the line tangent to the point a and so,
we have shown that any concave function must lie on or below the tangent
to the function at that point.
b.
2 2
x2
Which shows that any concave function must lie on or below its tangent
plane.
2.13
The tangent to g(x) at the point E(x) will have the form c dx g (x) for
all values of x and c dE ( x) g ( E ( x)) .
But, E ( g ( x)) E (c dx) c dE ( x) g ( E ( x)) .
b.
Using the same procedure as before with instead of and vice versa,
we have the following proof:
The tangent to g(x) at the point E(x) will have the form c dx g (x) for
all values of x and c dE ( x) g ( E ( x)) .
Now, E ( g ( x)) E (c dx ) c dE ( x) g ( E ( x)) .
c.
Let u 1 F ( x ),
(1 F ( x )) dx (1 F ( x )) x 0
f ( x ) xdx 0 E ( x ) E ( x )
d.
e.
RHS
E( x) 1
t
t
1
t
1
xf ( x )dx
1.
f ( x )dx
x
t
0
xf ( x )dx xf ( x )dx
tf ( x )dx
3. E(x) =
4.
x 2
2 x dx 2
2
x
f ( x )dx P ( x t ) LHS
2. F ( x) f ( x)dx 1
1
1
x 2
2 x dx 2
(1 F ( x )) dx =
1 x 2
1
dx x 1
P( x t ) 1 F (t ) t 2
1
t2
E ( x) 1
t
t
Since x 1,
1 E ( x)
t
t2
1.
2.
3.
4.
5.
x2
1 3 2
1 3 dx 9 x 1 1
3
2 x
1 4 2
16 1 5
E ( x) xf ( x) dx
dx
x 1
1 3
12
12
4
2
0 x
0
1
1
P ( 1 x 0)
dx x 3 1
1 3
9
9
2
x
P ( x and A)
3x 2
f ( x A)
3
;0 x 2
8
P ( A)
8
9
3
23x
3 4 2
3
E ( x A) xf ( x A)dx
dx
x 0
0 8
32
2
f ( x )dx
b.
c.
E (.5 x .5 y ) .5 E ( x ) .5 E ( y ) E ( x )