Microeconomic Theory
12th Edition
ISBN: 9781337517942
Author: NICHOLSON
Publisher: Cengage
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Question
Chapter 3, Problem 3.5P
a
To determine
To know:
Form of utility function.
b)
To determine
To prove:
Ways to simplify IC curve to be of single good.
c)
To determine
To find:
Cost of good defined in part (b).
d)
To determine
To show:
Percentage increase in
e)
To determine
To show:
f)
To determine
To show:
Spread of tax on four goods.
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Please answer questions D-H, I have already answered A , B,C but it may help you to still solve them yourself. Thank you!
2. A firm’s production function is given by:Q = 10KLThe unit capital and labour costs are 2 and 1 pounds respectively. The firm is contracted to produce2000 units.(a) Write out the optimisation problem of the firm. (b) Express this problem using a Lagrangian function. (c) Find values of K and L which fulfil the contract with minimal cost to the firm. (d) Calculate the total cost to the firm.
3. Consider the following estimated regression equation, estimated using a sample of firms, where RDis total firm spending on research and development in USD ($), Revenue is total firm revenuein USD ($), and W ages is the firms’ total spending on wages in USD ($) (standard errors inparentheses):RDd = 1000(600)+ 0.5(0.1)Revenue + 1.5(0.5)W ages,(a) Interpret the coefficients on each of the explanatory variables. (b) Which of the three coefficients are statistically significant at the 5% level of significance? Howdo you know? A researcher runs a two-sided statistical test of the null hypothesis that both the coefficients onthe explanatory variables above are jointly equal to 0.25 (mathematically, that β1 = β2 = 0.25),and reports a p-value of 0.045.(c) What does this p-value mean for the outcome of the test? (d) What would an appropriate two-sided alternative hypothesis look like?
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