Consider the following function of two choice variables Z = f (x,y) Write down the first order and the second order conditions for a minimum.

economics

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1.(i) Consider the following function of two choice variables 

 Z = f (x,y)


Write down the first order and the second order conditions for a minimum. 


 (ii) Suppose an individual’s health status Z (measured on a scale of 0 to 10) is a function of two health enhancing drugs x and y (measured as daily dosages) as follows


Z = - x 2 + 2x - y 2 + 4y+ 5 


(a) Find fx, fy, fxy, fyx, fxx, fyy 

(b) Show that the function has only one stationary point at x = 1 and y = 2 and it is a maximum. 

(c) Estimate the value of the health status Z at the point derived at (b)


2. The marginal cost (MC) for producing a certain article in $ is given by


where q is the quantity of production. Determine constant A, B, C such that


And hence evaluate the total weekly variable costs involved in producing 

(i) 10 items per week 

(ii) 100 items per week

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