Question
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
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