Question

Question 2: Lincoln has preferences over game apps (good 1) and navigation apps (good 2) for his iPhone that are represented by the utility function U(91, 92) = ( 91? + The price of game apps is pı = 2, the price of navigation apps is p2 = 1, and he has Y = 10 dollars of income. You can ignore the possibility of a corner solution in this problem. (1) Calculate his marginal rate of substitution (MRS) (4 points). (2) Solve for Lincoln's optimal choices (6 points)? Jessie develops game apps q using computer programmers L and computers K. Her production function is q=F(L, K) = ([2/3 + K1/3) 3 (3) Calculate her marginal rate of technical substitution (MRTS) (4 points). (4) Does her production function display increasing, decreasing, or constant re- turns to scale? Helpful Math Fact: 21/3 = 1.26 (8 points). (5) Suppose the exponent in this function was changed to an arbitrary parameter B> 1 sm Lincoln's utility function is U (91, 92) = ( 973 +973) and Jessie's production function is F(L,K) = ([2/3 + K1/3). For which parts (1)-(4) would your answer change. You do not need to find the new answers, just state which parts have different answers and explain your reasoning (8 points).

Answer 1

DATE: PAGE )* + ) ( 0 ( /= ر21رة = F - چاو + دوه ډول همه داد توپلاوې ده دريول /نو و شهاد M.RS اهد M.R.S = fi Also 2) و داوة دو به دو وی

Also Budget line is _291 +9,2 = 10 2q2 + q2-10 297 +92-10 = 0 292449,2+592-10=0 292 (92-2) +5692-2) -0 92=-= (egitated) _22=2 km So asqa=2, 91 = qz² a q = 22 147 q: Flyk) = {1 + اج(3" 3/ت عمال - MUK = B/1 2/3 +6" ) X L K 4 » lupus

M.R.S - MUL - 2/143+k13] Mux 743 +K"13) ² € 2/3 - 2 (1 213 +113) y k213 2013- 1143 & akh q=Fk) = (2/.13 Elaby ak) - (AL)**+ (1x)") - (2005>*+ Ayo po ta So They comot be seferated So they does not show any return But other parts as a seperate question. Thanks ☺