a) Bob’s utility function over good x and y is U(x, y) = x2y His income is 100 and price of x is 2 and price of y is 5 i. Compute the Marginal rate of substitution between x and y (2 marks) ii. Compute the quantities of X and Y Bob will buy (2 marks) b) For the production function Q= K + 3L, i. what returns to scale does it exhibit ii. Let output be a function of three inputs: Q= AKaLb Nc a. Is this function Homogeneous? If so of what degree (3 marks) b. Using the function in ii above state under what conditions would

Question

a)	Bob’s utility function over good x and y is U(x, y) = x2y His income is 100 and price of x is 2 and price of y is 5  i.	Compute the Marginal rate of substitution between x and y 	         	         (2 marks) ii.	Compute the quantities of X and Y Bob will buy 			                        (2 marks)  b)	For the production function Q= K + 3L,  i.	what returns to scale does it exhibit   ii.	Let output be a function of three inputs: Q= AKaLb Nc  a.	 Is this function Homogeneous? If so of what degree 		         	         (3 marks) b.	 Using the function in ii above state under what conditions would

anonymous · Answer

a) i) 0.3994
ii) x= 33.35, y= 6.66
b) ii) yes , homogeneous; of degree 1_ under coubduglus production function