Answer in Microeconomics for franchesca #111132
April 21st, 2023
Solution:
Let soybeans be a commodity x, and milk a commodity y.
Then the Cobb-Douglas function will have the form:
“U(x,y)=x^{0.4}y^{0.6}”
“p_x=3, p_y=2”
The farmer will maximize utility from these two benefits under the following condition
“frac{MU_x}{p_x}=frac{MU_y}{p_y}”
“MU_x=frac{0.4y^{0.6}}{x^{0.6}}”
“MU_y=frac{0.6x^{0.4}}{y^{0.4}}”
“frac{0.4y^{0.6}}{3x^{0.6}}=frac{0.6x^{0.4}}{2y^{0.4}}”
“y=2.25x”
Consequently, a quart of milk brings him 2.25 times more benefits than a cup of soy.
We will find the income of a farmer entering the market with these two products.
“TR= displaystylesum_{i=1}^n p_iQ_i”
“TR=3times300+2times200=900+400=1300”
