45. Consider an exchange economy with two agents, 1 and 2, and two goods, X and Y. There are 6 units of X and 4 units of Y available. An allocation is denoted by (x1,y1), (x2, y2), where (x1,y1) is agent 1's consumption bundle, (x2, y2) is agent 2's consumption bundle, x1 + x2 = 6 and y₁ + ¥2 = 4. Agent 1 has the utility function u₁ = min{x1,y1} and agent 2 has the utility function u2(x2, y2) = min{x2,y2}. Which of the following allocations is not Pareto efficient? A. (2,2), (4,2) B. (3,2), (3,2) C. (3,1), (3,3) D. (1,2), (5,2)
45. Consider an exchange economy with two agents, 1 and 2, and two goods, X and Y. There are 6 units of X and 4 units of Y available. An allocation is denoted by (x1,y1), (x2, y2), where (x1,y1) is agent 1's consumption bundle, (x2, y2) is agent 2's consumption bundle, x1 + x2 = 6 and y₁ + ¥2 = 4. Agent 1 has the utility function u₁ = min{x1,y1} and agent 2 has the utility function u2(x2, y2) = min{x2,y2}. Which of the following allocations is not Pareto efficient? A. (2,2), (4,2) B. (3,2), (3,2) C. (3,1), (3,3) D. (1,2), (5,2)
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
The question is based on pure exchange economy.
1. For 45 provide the set of all outcomes that are pareto efficient.
2. For 46, provide an algebric solution if possible. Prove the result mathematically (answer for 46 is C since X is abundant)
3. For 47, provide a set of points (if exists) that will take us to the given equilibrium.
Thank you.
Transcribed Image Text:45. Consider an exchange economy with two agents, 1 and 2, and two goods, X and Y.
There are 6 units of X and 4 units of Y available. An allocation is denoted by (x1, Y1),
(x2, Y2), where (x1, Y1) is agent 1's consumption bundle, (x2, Y2) is agent 2's consumption
bundle, r1 + x2 = 6 and y1 + Y2 = 4. Agent 1 has the utility function u1 = min{x1,Y1}
and agent 2 has the utility function u2(x2, Y2)
min{r2, y2}. Which of the following
=
allocations is not Pareto efficient?
А. (2,2), (4,2)
В. (3,2), (3,2)
С. (3,1), (3,3)
D. (1,2), (5,2)
46. Consider an exchange economy with two goods and two agents have the same preferences
as in the previous question. Agent l's endowment is (0, a) and agent 2's endowment is
(B, 0). What is generally true?
A. Any allocation in which each agent gets equal amounts of the two goods is an
equilibrium allocation
B. If B < a, then the price of X is 0
C. If B > a, then the price of X is 0
D. Any allocation in which agent 2 gets none of good Y is an equilibrium allocation
Transcribed Image Text:47. Consider an exchange economy with two goods and two agents. Agent 2's utility is
as above. The equilibrium allocation is (x1, Y1) = (6,1) and (x2, Y2)
equilibrium prices are (1, 1). What could be the endowment?
(4, 4). The
A. Agent l's endowment is (2,5) and agent 2's endowment is (8,0)
B. Agent l's endowment is (7,0) and agent 2's endowment is (3,5)
C. Both (a) and (b)
D. Neither (a) nor (b)
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 3 steps with 5 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Recommended textbooks for you
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-…
Economics
ISBN:
9781259290619
Author:
Michael Baye, Jeff Prince
Publisher:
McGraw-Hill Education