= 5. Consider a two-consumer one-firm economy with a single input good and a single output good. Consumers' utility functions are u¹(x4) x + 3x4 and u (x³): 4x² + x. Suppose that the input good is divisible and that wA = wB = 1/2. Suppose that the output good is indivisible (i.e., that xq, q = : 0, 1, 2,...), and that the firm's production technology is such that it requires 1 unit of input to produce one unit of output. = (a) Derive the Pareto set of this economy. (b) For all Pareto-efficient allocations from (a), derive a competitive equilibrium for this economy that generates these allocations.

= 5. Consider a two-consumer one-firm economy with a single input good and a single output good. Consumers' utility functions are u¹(x4) x + 3x4 and u (x³): 4x² + x. Suppose that the input good is divisible and that wA = wB = 1/2. Suppose that the output good is indivisible (i.e., that xq, q = : 0, 1, 2,...), and that the firm's production technology is such that it requires 1 unit of input to produce one unit of output. = (a) Derive the Pareto set of this economy. (b) For all Pareto-efficient allocations from (a), derive a competitive equilibrium for this economy that generates these allocations.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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