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Ecomath Assignment

This document contains an economics problem set with 4 questions: 1) Evaluate a production function and its marginal rate of technical substitution, and estimate capital increase needed to maintain output with 1 unit less labor. 2) Find the utility-maximizing quantities of two goods given a utility function and budget constraint. 3) Find the cost-minimizing quantities of two goods given a total cost function and production quantity constraint. 4) Find the profit-maximizing quantities and profit of two goods given cost and demand functions, and a production quota constraint. Estimate new optimal profit with 1 unit higher quota.

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Reginald Gyamerah
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24 views1 page

Ecomath Assignment

This document contains an economics problem set with 4 questions: 1) Evaluate a production function and its marginal rate of technical substitution, and estimate capital increase needed to maintain output with 1 unit less labor. 2) Find the utility-maximizing quantities of two goods given a utility function and budget constraint. 3) Find the cost-minimizing quantities of two goods given a total cost function and production quantity constraint. 4) Find the profit-maximizing quantities and profit of two goods given cost and demand functions, and a production quota constraint. Estimate new optimal profit with 1 unit higher quota.

Uploaded by

Reginald Gyamerah
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Department of Economics

University of Ghana
First Semester 2018/2019
Econ 213: Elements of Mathematics for Economists
Problem set 4

Note: This problem set is to be submitted by All Groups on Tuesday, November 13, 2018.
Drop your solutions (prepared on foolscap or official paper in a box at the reception of the
EPM building (Annex of Economics Dept.) before 3pm on the stipulated submission date.

1. Evaluate and for the production function

given that current levels of K and L are 7 and 4 respectively. Hence


(a) write down the value of MRTS
(b) estimate the increase in capital needed to maintain the current level of output given a
1 unit decrease in labour.

2. An individual’s utility function is given by

Where and denote the number of items of goods 1 and 2. The prices of the goods
are ¢2 and ¢10 respectively. Assuming the individual has ¢400 available to spend on
these goods, find the utility-maximizing values of and .

3. A firm’s total cost function is given by

Where and denote the number of items of goods 1 and 2, respectively that are
produced. Using the substitution method, find the values of and which minimize
costs if the firm is committed to producing 40 goods of either type in total.

4. A monopolistic producer of two goods, 1 and 2, has a joint total cost function

where and denote the quantity of items of goods 1 and 2, respectively that are
produced. If P1 and P2 denote the corresponding prices then the demand equations are

Using the Lagrange multipliers approach, find the maximum profit if the firm is
contracted to produce a total of 15 goods of either type. Estimate the new optimal profit
if the production quota rises by 1 unit.

Dr. Bernardin Senadza 1

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