8. "When a policy creates winners and losers, the Pareto (unanimity) principle itself is highly applicable to analyze this policy." Question 8 options: True False 9. Consider a society with three individuals, P1, P2 and P3, and three policies, A, B and C. Their utilities for the three policies are given below (e.g., P1 gets 100 units of utility for policy A, 81 units of utility for policy B, 49 units of utility for policy C, etc.) P1 P2 P3 Policy A 100 4 25 Policy B 16 25 81 Policy C 12.25 49 64 The majority rule would rank the three policies as: Question 9 options: B the best, A the second best, C the worst A the best, B the second best, C the worst C the best, A the second best, B the worst B the best, C the second best, A the worst other

8. "When a policy creates winners and losers, the Pareto (unanimity) principle itself is highly applicable to analyze this policy." Question 8 options: True False 9. Consider a society with three individuals, P1, P2 and P3, and three policies, A, B and C. Their utilities for the three policies are given below (e.g., P1 gets 100 units of utility for policy A, 81 units of utility for policy B, 49 units of utility for policy C, etc.) P1 P2 P3 Policy A 100 4 25 Policy B 16 25 81 Policy C 12.25 49 64 The majority rule would rank the three policies as: Question 9 options: B the best, A the second best, C the worst A the best, B the second best, C the worst C the best, A the second best, B the worst B the best, C the second best, A the worst other

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter4: Utility Maximization And Choice

Section: Chapter Questions

Problem 4.1P

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Please explain in detail Utility Theory and its role in consumer choice and public decision making
7. An economy consists of two individuals, Lynne and Jonathan, whose utility levels are given by U₁ and U₁, respectively. a. Suppose that the social welfare function is W = U₁ + U₁ True or false: Society is indifferent between giv- ing a dollar to Lynne and a dollar to Jonathan. b. Now suppose that, instead, the social welfare function is W = U₁ + 8U, True or false: Society values Jonathan's hap- piness more than Lynne's. c. Now suppose that, instead, the social welfare function is W = min[U₂, U₁] True or false: In this society, the optimal dis- tribution of income is complete equality.
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3. Anthony loves going to the opera while Becky loves watching football. The following diagram shows the payoffs for their choice of activity. For example, if Anthony chooses opera and Becky chooses football, then the activities are valued at £10 to Anthony and £20 to Becky, respectively. Assume that they can only choose one activity each. Based on this information, determine whether each of the following statements is true or false. Becky Opera Football Opera 80, 10 0,0 Football 10, 20 20, 40 Anthony (a) There are two Nash equilibria: (Opera, Opera) and (Football, Football). (b) If Anthony announces that he will choose Opera and sticks to it, then (Opera, Opera) will be chosen. (c) If Anthony offers £20 to Becky for coming to the opera with him, then (Opera, Opera) may be chosen. (d) If Anthony offers £50 to Becky for coming to the opera with him, then (Opera, Opera) will definitely be chosen.
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4. Marvin is given a number of choices between various lotteries where the possible outcomes include a vacation, a motorbike, a pair of shoes and a round of applause, or X = {v,m, s, a}. It is known that, according to Marvin's preferences, v > m > s > a. In addition, he claims he would be indifferent between the motorbike and a lottery that results in a vacation with probability 0.4 and a pair of shoes with probability 0.6, and he would furthermore be indifferent between a pair of shoes and a lottery that results in a motorbike with probability 0.5 and a round of applause with probability 0.5. Marvin has a utility function u: X → R (in other words u maps each element in X to a real number) and he in an expected utility maximiser (in other words his preferences conform to the axioms G1 to G6). 4.1. Assuming Marvin's claims about indifference are correct, derive u(m) and u(s) in terms of u(v) and u(a). 4.2. Von Neumann-Morgenstern utility functions are only unique up to positive affine…
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"Most of the literature on Islamic economics dealing with consumer behavior at microeconomic level focuses on free market setting with some additional assumptions from the Islamic primary sources (e.g., Hamdani et el 2004; Yasin and Zafar 2016; Amin et el 2014; Ghassan 2016; Dilek, et el 2018). A common assumption made by Islamic economists is that the consumer would follow the Islamic injunctions in an ideal Islamic economy. In doing so, they extend the definition of rationality and include in it moral, spiritual, and social perspectives ( e.g., Adam et el 2018; Furqani 2017; Al-Aaidroos et el 2016; Ghassan 2015, 2016; Fahim Khan 2013, 2014; Bendjilali 1993; Naqvi 1981; Kahf 1980, and Zarqa 1980). Their objective is to show how a rational consumer will behave if he or she follows the Islamic teachings. In general, Islamic economists accept the analysis of mainstream economics to the extent it does not conflict with the Islamic teachings. (e.g. Yasin and Zafar 2016;…
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Explain the concept of the utility possibility frontier. What is the role of the utilitypossibility frontier in the social welfare maximization problem of a welfarist society?
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