8. Jane has 3 liters of soft drinks and 9 sandwiches. Bob, on the other hand, has 8 liters of soft drinks and 4 sandwiches. With these endowments, Jane's marginal rate of substitution (MRS) of soft drinks for sandwiches is 4 and Bob's MRS is equal to 2. Draw an Edgeworth box diagram to show whether this allocation of resources is efficient. If it is, explain why. If it is not, what exchanges will make both parties better off?

8. Jane has 3 liters of soft drinks and 9 sandwiches. Bob, on the other hand, has 8 liters of soft drinks and 4 sandwiches. With these endowments, Jane's marginal rate of substitution (MRS) of soft drinks for sandwiches is 4 and Bob's MRS is equal to 2. Draw an Edgeworth box diagram to show whether this allocation of resources is efficient. If it is, explain why. If it is not, what exchanges will make both parties better off?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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1. True/False: Partial equilibrium analysis only concerns supply or demand alone, whereas general equilibrium analysis concerns supply and demand simultaneously. 2. True/False: In general equilibrium analysis, an allocation is said to be as a reasonable allocation if each consumer consumes the same bundle its value is no more than the value of the consumer's income. 3. True/False: In general equilibrium analysis, an allocation is said to be as a reasonable allocation if each consumer consumes the same bundle its value is no more than the value of the consumer's income.
3. Jane is currently consuming 4 glasses of milk and 10 cookies, while Betty is consuming 9 glasses of milk and 3 cookies. Jane views milk and cookies as perfect substitutes (her MRS is 1), while Betty prefers cookies to milk and is willing to give up 3 glasses of milk to get 1 cookie. Is the current allocation of milk and cookies Pareto efficient? Explain with use of a diagram.
7. In an Edgeworth box for two consumers, A and B, with endowments of commodities Xa and Ya are A's endowments, Xb and Yb are B's, and Xo = Xa + Xb, Yo = Ya + Yb), the competitive equilibrium allocation of the two commodities represents a mutual tangency of both consumers' indifference curves with each other and with a common budget line. (a) The conditions require that A and B consume at a point on their budget lines where their indifference curves have the same marginal rate of substitution, and equilibrium for the market as a whole requires that the sum of the individuals' demands for each commodity must equal the totals (Xo and Yo) available. Mathematically express the point of equilibrium, that is, express the above statement with equations in relating each endowments, equilibrium points (Xa, Xb, Ya, Yb), and totals ((Xo, Yo). (b) Suppose MRSa = Ya/Xa, MRSB = Yb/Xb, Xa = 10, Ya, = 100, Xb = 50, Yb = 20, and let good Y be the numeraire (Py =1). Verify that the competitive…
Solve the attachment.
1. a) Consider an economy with 3 agents, Mohammed (M), David (D) and Susan (S). There are two goods available, good x, and good y. The marginal rates of substitution (where good x is on the horizontal axis and good y is on the vertical axis) are given by for Mohammed, for David and for Mohammed and David are both consuming twice as much of the good x than good y, while Susan is consuming equal amounts of x and y. What are the conditions for Pareto efficiency in an exchange economy? Are these consumption levels economically efficient? Can these consumption allocations be observed in a perfectly competitive equilibrium in an exchange economy without production? Explain. b. There are two firms in the economy. Each firm employs positive amounts of capital and labour. The technology satisfies diminishing marginal rate of technical substitution of labour for capital. Currently, A’s marginal rate of technical substitution of labour for capital is 4 while B’s marginal rate of technical…
6. In an Edgeworth box for two consumers, A and B, with endowments of commodities Xa and d Ya are A's endowments, Xb and Yb are B's, and Xo = Xa + Xb, Yo = Ya + Yb), the competitive equilibrium allocation of the two commodities represents a mutual tangency of both consumers' indifference curves with each other and with a common budget line. (b) Suppose MRSa = Ya/Xa, MRSb = Yb/Xb, Xa = 10, Ya, = 100, Xb= 50, Yb = 20, and let good Y be the numeraire (Py = 1). Verify that the competitive equilibrium price is Px = 2.
Question 4 of 10 Which of the following best explains why the game of economics is about setting goals as much as it is about making allocation decisions? A. It's unnecessary to have a goal to make allocation decisions. B. There are different and incompatible economic goals. C. Consumers need goals in order to know what goods and services to buy. D. Making allocation decisions requires information and resources. SUBMIT
Consider an exchange economy with two consumers J and K and two goods F and C. Suppose the consumers have preferences with the following MRS of F in terms of C MUP MU 5CJ MRS FC FJ and MU MRSC = CK MUŽ FK where J, K are labels for the consumer, not powers. Suppose the economy has 24 units of good F and 20 units of good C. If consumer J is endowed with 12 units of good F and the consumers are given a Pareto efficient allocation, how many units of good C will consumer ** K** be provided?
9. Consider an exchange economy with two individuals, a and b, and two goods, x and y. Individual a has utility function U"(x, y) = x?y, and individual 6 has utility function U(x, y) = 3x+4y. What condition will hold at all Pareto efficient allocations in the interior of the Edgeworth box? A. ***8yª = 3r" B. yº = { C. 8y = 3.xb D. y" = 2x"
Grapes and bananas are perfect complements for Jane and Betty. Jane eats one grape per three bananas.; Betty eats three grapes per one banana. Once they go to sports for hours, Jane had 20 grapes and 10 bananas and Betty had 10 grapes and 20 bananas. (assume that grapes and bananas can be divided into half) 1.Show all Pareto optimal allocations of grapes and bananas between Jane and Betty in the Edgeworth Box. Draw a bunch of indifference curves and look for tangencies.
Bucky has $20 to spend on bowling and billiards. The prices of bowling and billiards are $4 and $1 por game, respectively. Assume he has a voucher for two free games of bowling Suppose bowling is the "X" good and billiards are the "Y" good How many games of bowling can Bucky afford? How many games of billiards can Bucky afford? Where is the "link" in Bucky's budget constraint where opportunity cost of billiards in terms of bowling games changes? (This should be answered as quantity of bowling games, quantity of billiards games)
case 1,2,3