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A. Assume the production function is given by:f(x 1 ,x 2 )=2x 1 0.6 3x 2 0.15 What is the absolute value of the technical

A. Assume the production function is given by:f(x1,x2)=2x10.63x20.15

What is the absolute value of the technical rate of substitution?

Select one:

a.4/3

b.12

c.4x2/x1

B. Moody's utility for consumption is represented by the utility function U(c)=100In(c). His earnings this year are $25,000. There is a 15% chance that he will incur a car accident later this year, which will lead to a $6,000 cost that must be paid this year. He can fully insure by paying a $1,250 premium. With the given utility function, what is the expected utility of Moody's optimal bundle this year? Assume that Moody is never a saver or borrower. Pick the closest answer.

Select one:

a.1004

b.1007

c.1009

d.2000

e.2003

C. Joe's daily utility is. He is an expected utility maximizer. His consumption for tomorrow will be either $1331with 60% or $125 with 40%. If his consumption tomorrow would instead be $X with certainty so that he has the same utility, what is X?

Select one:

a.

300

b.

450

c.

600

d.

750

e.

900

image text in transcribed
Joe's daily utility is U(Y) = 3/Y2. He is an expected utility maximizer. His consumption for tomorrow will be either $1331with 60% or $125 with 40%. If his consumption tomorrow would instead be SX with certainty so that he has the same utility, what is X? Select one: a. 300 b. 450 c. 600 - d. 750 V e. 900

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