Chapter 2: Problem 6
Suppose that \(f(x, y)=x y .\) Find the maximum value for \(f\) if \(x\) and \(y\) are constrained to sum to \(1 .\) Solve this problem in two ways: by substitution and by using the Langrangian multiplier method.
Chapter 2: Problem 6
Suppose that \(f(x, y)=x y .\) Find the maximum value for \(f\) if \(x\) and \(y\) are constrained to sum to \(1 .\) Solve this problem in two ways: by substitution and by using the Langrangian multiplier method.
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Get started for freeShow that if \(f\left(x_{1}, x_{2}\right)\) is a concave function, it is also a quasi-concave function. Do this by comparing Equation 2.107 (defining quasi- concavity) to Equation 2.88 (defining concavity). Can you give an intuitive reason for this result? Is the converse of the statement true? Are quasiconcave functions necessarily concave?
Suppose \(U=(x, y)=4 x^{2}+3 y^{2}\) a. \(\quad\) Calculate \(\partial U / \partial x, \partial U / \partial y\) b. Evaluate these partial derivatives at \(x=1, y=2\) c. Write the total differential for \(U\) d. Calculate \(d y / d x\) for \(d U=0\) - that is, what is the implied trade-off between \(x\) and \(y\) holding \(U\) constant? e. Show \(U=16\) when \(x=1, y=2\) f. In what ratio must \(x\) and \(y\) change to hold \(U\) constant at 16 for movements away from \(x=1, y=2 ?\) g. More generally, what is the shape of the \(U=16\) contour line for this function? What is the slope of that line?
Taxes in Oz are calculated according to the formula \\[ T=.01 I^{2} \\] where \(T\) represents thousands of dollars of tax liability and \(I\) represents income measured in thousands of dollars. Using this formula, answer the following questions: a. How much tax do individuals with incomes of \(\$ 10,000, \$ 30,000,\) and \(\$ 50,000\) pay? What are the average tax rates for these income levels? At what income level does tax liability equal total income? b. Graph the tax schedule for Oz. Use your graph to estimate marginal tax rates for the income levels specified in part (a). Also show the average tax rates for these income levels on your graph. c. Marginal tax rates in \(\mathrm{Oz}\) can be estimated more precisely by calculating tax owed if persons with the incomes in part (a) get one more dollar. Make this computation for these three income levels. Compare your results by calculating the marginal tax rate function using calculus.
For each of the following functions of one variable, determine all local maxima and minima and indicate points of inflection (where \(f^{\prime \prime}=0\) ): a. \(f(x)=4 x^{3}-12 x\) b. \(f(x)=4 x-x^{2}\) c. \(f(x)=x^{3}\)
Suppose a firm's total revenues depend on the amount produced ( \(q\) ) according to the function \\[ T R=70 q-q^{2} \\] Total costs also depend on \(q:\) \\[ T C=q^{2}+30 q+100 \\] a. What level of output should the firm produce in order to maximize profits \((T R-T C) ?\) What will profits be? b. Show that the second-order conditions for a maximum are satisfied at the output level found in part (a). c. Does the solution calculated here obey the "marginal revenue equals marginal cost" rule? Explain.
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