ECON 313 Practice Problem Set Overview
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hongsik kimECON 313 Practice Problem Set Overview
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hongsik kimCommon questions
Powered by AIThe total market demand is found by aggregating the individual demands. For type A, the total demand is 60 * (100 - 5P) for 60 consumers, and for type B, the demand is 40 * (150 - 3P) for 40 consumers. Adding these gives Q = 60(100 - 5P) + 40(150 - 3P), simplifying to Q = 9,000 - 420P .
A boundary solution like Min(2x, y) implies perfect complements or Leontief preferences, where well-being is maximized not by varying proportions but by focusing on a fixed input ratio. Optimization aligns consumption precisely along that fixed ratio, sandwiching consumption to the left of any typical indifference curve shape, starkly contrasting with traditions balancing MRS with price ratios .
The expected value E(X) is calculated as ∑x_i * P(x_i) = 5 * 0.3 + 6 * 0.5 + 7 * 0.2 = 5.9. For Y = X^0.5, calculate the expected value E(Y) using the probabilities: 2.236 * 0.3 + 2.449 * 0.5 + 2.646 * 0.2 = 2.451 .
To maximize profit, a monopolist sets marginal revenue (MR) equal to marginal cost (MC). Given Q = 100 - P, invert to P = 100 - Q for total revenue TR = (100-Q)*Q, differentiate to find MR. Set MR = MC to solve for optimal Q and substitute back to find P. Assuming no cost information limits calculation, typically P > MC .
To produce 200 units, set 2K^0.5L^0.5 = 200, write as L = (200/(2K^0.5))^2. By minimizing costs C = rK + wL subject to the production constraint, and using lagrange multipliers or substitution, optimal K and L can be found. For 200 units with given prices, it calculates to K = 100 and L = 100 .
The cardinal utility approach quantifies utility in measurable terms, allowing the comparison of the utility gained from consuming different bundles in terms of magnitudes. However, the ordinal utility approach ranks preferences in order, without measuring utility's absolute magnitude. In practice, the ordinal utility approach is more commonly used because absolute utility values are difficult to determine consistently .
The MRS reflects the rate at which a consumer is willing to trade one good for another while maintaining the same level of utility. In utility maximization, the MRS must equal the ratio of the goods' prices (Px/Py), ensuring that expenditure on each good generates the same marginal utility per dollar spent, maximizing total utility given the budget constraint .
In a sequential-move game, Firm 1 selects its output first, taking Firm 2's reaction into account. Firm 2, observing Firm 1's choice, reacts accordingly. The Nash Equilibrium can be derived by backward induction. Given the demand curve P = 36 - (Q1 + Q2), the equilibrium outputs are typically calculated using reaction functions. Calculating these yields a result where Q1 = 12 and Q2 = 12 .
With K fixed at 16, the production function simplifies to Q = 8L^0.5. Thus, L = (Q/8)^2 and the cost function C(Q) = rK + wL becomes C(Q) = 16 + 2(Q/8)^2. To find the marginal cost (MC), differentiate the cost function with respect to Q, yielding MC(Q) = (1/32)Q .
To solve Tom's utility maximization problem, set the budget constraint as 4A + 10B = 100. The objective is to maximize U(A, B) = AB subject to this constraint. By using the method of Lagrange multipliers or setting up the marginal rate of substitution equal to the price ratio (MRS = PA/PB), the maximum utility is achieved when the marginal utility per dollar is equalized. Solving this yields optimal consumption of A = 5 apples and B = 5 bananas .