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Production
Exercises of Microeconomics
Tramontana
Exercises Micro
Exchange
Production
Outline
Exchange
Exercise
Exercise
Exercise
Exercise
17.4
17.6
17.9
17.11
Production
Exercise 18.2
Tramontana
Exercises Micro
Exercise 17.4
Exchange
Exercise 17.6
Production
Exercise 17.9
Exercise 17.11
Outline
Exchange
Exercise
Exercise
Exercise
Exercise
17.4
17.6
17.9
17.11
Production
Exercise 18.2
Tramontana
Exercises Micro
Exercise 17.4
Exchange
Exercise 17.6
Production
Exercise 17.9
Exercise 17.11
Exercise 17.4
u (x , x
u (x , x
A
A
1
A
2
m
m
= p2
B = p1
A
Tramontana
Exercises Micro
Exercise 17.4
Exchange
Exercise 17.6
Production
Exercise 17.9
Exercise 17.11
Solution
In our case:
= a pp
xA = (1 a)
1
Tramontana
= xB2
Exercises Micro
Exercise 17.4
Exchange
Exercise 17.6
Production
Exercise 17.9
Exercise 17.11
Solution
that is:
= xB2 =
1 + p2
Tramontana
Exercises Micro
Exercise 17.4
Exchange
Exercise 17.6
Production
Exercise 17.9
Exercise 17.11
Solution
ap
+ 1+1p = 1
Tramontana
p:
2
1a
Exercises Micro
Exercise 17.4
Exchange
Exercise 17.6
Production
Exercise 17.9
Exercise 17.11
Solution
x
x
= 1a
=a
B
1
A
1
Tramontana
x
x
= 1a
=a
B
2
A
2
Exercises Micro
Exercise 17.4
Exchange
Exercise 17.6
Production
Exercise 17.9
Exercise 17.11
Outline
Exchange
Exercise
Exercise
Exercise
Exercise
17.4
17.6
17.9
17.11
Production
Exercise 18.2
Tramontana
Exercises Micro
Exercise 17.4
Exchange
Exercise 17.6
Production
Exercise 17.9
Exercise 17.11
Exercise 17.6
v (p , p , y ) = ln y a ln p
v (p , p , y ) = ln y b ln p
1
(1 a) ln p2
(1 b) ln p2
Exercises Micro
Exercise 17.4
Exchange
Exercise 17.6
Production
Exercise 17.9
Exercise 17.11
Solution
Remember that:
Roy's identity
x (p, m) =
i
v (p ,m)
p
v (p,im)
m
= pa
= pb
v1 (p ,y )
p2
v2 (p ,y )
p2
Tramontana
= (1pa)
2
= (1pb)
2
Exercises Micro
v1 (p ,y )
y
v2 (p ,y )
y
=
=
1
y
1
y
Exercise 17.4
Exchange
Exercise 17.6
Production
Exercise 17.9
Exercise 17.11
Solution
x
x
1
1
ay
1
2
by
p1
p1
x
x
2
1
(1a)y
2
2
(1b )y
p2
p2
y =p
+ p2
x
x
1
1
2
1
+ x21 = 11 + 12 = 2
+ x22 = 12 + 12 = 2
Tramontana
Exercises Micro
Exercise 17.4
Exchange
Exercise 17.6
Production
Exercise 17.9
Exercise 17.11
Solution
ay by
+
p p
1
Given that
y =p
+ p2 and setting
a(1 + p
=2
= 1 as numeraire we have:
) + b(1 + p2 ) = (1 + p2 )(a + b) = 2
and nally:
Tramontana
a+b
Exercises Micro
Exercise 17.4
Exchange
Exercise 17.6
Production
Exercise 17.9
Exercise 17.11
Outline
Exchange
Exercise
Exercise
Exercise
Exercise
17.4
17.6
17.9
17.11
Production
Exercise 18.2
Tramontana
Exercises Micro
Exercise 17.4
Exchange
Exercise 17.6
Production
Exercise 17.9
Exercise 17.11
Exercise 17.9
Tramontana
p
p
Exercises Micro
Exercise 17.4
Exchange
Exercise 17.6
Production
Exercise 17.9
Exercise 17.11
Solution
x
x
2
3
1
3
p
p
1
2
p
p
1
2
Tramontana
1
2
= .
Exercises Micro
Exercise 17.4
Exchange
Exercise 17.6
Production
Exercise 17.9
Exercise 17.11
Outline
Exchange
Exercise
Exercise
Exercise
Exercise
17.4
17.6
17.9
17.11
Production
Exercise 18.2
Tramontana
Exercises Micro
Exercise 17.4
Exchange
Exercise 17.6
Production
Exercise 17.9
Exercise 17.11
Exercise 17.11
p
p
1
2
= p1 = p2
Tramontana
Exercises Micro
Exercise 17.4
Exchange
Exercise 17.6
Production
Exercise 17.9
Exercise 17.11
Solution
Tramontana
Exercises Micro
Exercise 17.4
Exchange
Exercise 17.6
Production
Exercise 17.9
Exercise 17.11
Solution
A : (1, 0) B : (0, 1)
or
A : (0, 1) B : (1, 0)
Tramontana
Exercises Micro
Exchange
Production
Exercise 18.2
Outline
Exchange
Exercise
Exercise
Exercise
Exercise
17.4
17.6
17.9
17.11
Production
Exercise 18.2
Tramontana
Exercises Micro
Exchange
Production
Exercise 18.2
Exercise 18.2
Tramontana
= 1.
Exercises Micro
Exchange
Exercise 18.2
Production
Solution
1
2
pb = 13
Tramontana
Exercises Micro
Exchange
Exercise 18.2
Production
Exercise 18.2(b)
(b) How many guns and how much butter does each consumer
consume?
Remember that demand functions with cobb-Douglas utility
functions are in general:
Cobb-Douglas
Given an utility function of the form:
u (x , x
1
) = x1 x2
= pm
Tramontana
= pm
Exercises Micro
Exchange
Production
Exercise 18.2
Solution
In our case both consumers have the same income given by their
endowments of 10 units of oil:
= m2 = 10po = 10
x
x
;
= (0.4) 110
/2 = 8
10
2
= (0.5) 1/2 = 10 ;
g
1
g
Tramontana
x
x
= (0.6) 110
/3 = 18
10
2
= (0.5) 1/3 = 15
b
1
Exercises Micro
Exchange
Production
Exercise 18.2
Exercise 18.2(c)
g = 2x 18 = 2x
x
Tramontana
=9
Exercises Micro
Exchange
Production
Exercise 18.2
Solution
= xb1 + xb2 = 33
From the production function we obtain the quantity of oil the rm
needs to produce 33 units of butter:
b = 3x 33 = 3x
x
Tramontana
= 11
Exercises Micro