QUESTION 1Alice (A) and Bob (B) have an endowment of goods 1 and 2, with Alice's endowment being (wt, w) = (1,2) and Bob's endowment equals(wf , w) = (1,3). Alice's utility is given by u4 (xf, xf) = 2 ln xf + In æ£ , while Bob's utility is uB(xf, x}) = ln xf + 2 ln x? .Suppose that the social planner considers it to be imperative that agent B consumes exactly one uniof good 1 and four units of good 2. Although the social planner can not force the individuals to a particular consumption, they can enforcetransfers of good 1 between the consumers (transfers of good 2 are not enforceable by the social planner). What transfer of good 1 wouldguarantee that in the resulting competitive Walrasian equilibrium consumer B consumes one unit of good 1 and four units of good 2?Answer this pleaseSelect one:O a.One half unit of good 1 has to be transferred from agent A to agent B.O b.There is no endowment for which agent B would consume x= 1 and x = 4 in the corresponding competitive equilibrium.Therefore, no such transfers exist.О с.One unit of good 1 has to be transferred from agent A to agent B.O d.Transferring good 1 is not sufficient. It is necessary to transfer one unit of good 2 from agent A to agent B.

Walrasian equilibrium: It is theory that explains the macroeconomy functions as a whole. It do not…

Answered: Alice (A) and Bob (B) have an endowment…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

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(5) A has utility function u4(x4) = x4 + x and initial endowment w4 = (3,6). Consumer B has utility function uB (xB) = xf · x% and initial endowment wB = (3,6). Consider an exchange economy with two consumers and two goods. Consumer (a) Is the initial endowment a Pareto efficient allocation? Justify your answer. (b) Find a competitive equilibrium (p, xª, x³) for the economy. (c) Construct the contract curve. A picture here is not a complete answer; you need to specify analytically the set of points that are in the contract curve.
Alex's utility is U (xA, YA) = min {TA, YA}, where zA, and y, are his consumptions of %3D goods a and y respectively. Becky's utility function is U (zB, YB ) = TBYB where ap and yp are her consumptions of goods a and y. Alex's initial endowment is 20 units of x and 12 units of y. Becky's initial endowment is 12 units of x and 20 units of y. At the Walrasian equilibrium, a) Both of them consume 16 units of good y each. b) Alex consumes 8 units of good y and Becky consumes 16 units of y. c) Both of them consumes 12 units of good x each. d) Alex consumes 12 units of good x and Becky consumes 20 units of x. e) None of the above
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Suppose you find that MU1(X1Xx2)=2x2 and MU₂(x1+x₂)=2x1. What is the rate at which the consumer is willing to trade good 2 for good 1 at bundle (2,4)? (Note: enter a positive number, i.e. enter the quantity of good 2 that the consumer is willing to give up for an additional-marginal-unit of good 1.) Question 20 Suppose you find that the expressions of the marginal utilities for a consumer are given by MU1 (1,2)= 2 and MU₂ (1,2)= 7. Then you can conclude that: This consumer has Cobb-Douglas tastes For this consumer good 1 and good 2 are perfect complements For this consumer good 1 and good 2 are perfect substitutes None of the above Question 21 Suppose a consumer is always willing to give up 5 units of good 2 for an additional unit of good 1. For this consumer: Good 1 and good 2 are perfect complements Good 1 and good 2 are perfect substitutes Good 1 and good 2 are both essential goods None of the above
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(1) Consider a small exchange economy with two consumers, A and B, and two commodities, ₁ and 2. Consumer A's initial endowment is 3 units of ₁ and 2 unit of 2. Consumer B's initial endowment has 5 units of 2₁ and 4 units of r2. Consumer A's utility function is given by U(₁, ₁) = x^x^. Consumer B's utility function is given by U(x,x) = 2x² + x2. Note that and are the amounts of the two goods for Consumer A, and rf and are amounts of the two goods for Consumer B. (a) Draw an Edgeworth box, showing the initial allocation. Label it as E. Measure Consumer A's consumption from the lower left and Consumer B's from the upper right. Also measure the number of ₁ on the horizontal axis and the number of r2 on the vertical axis. (b) Draw Consumer A's indifference curve (ICA) going through E. (c) Draw Consumer B's indifference curve (ICB) going through E.
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A small exchange economy is comprised of two of individuals, A and B, and two types of goods, x, ,x,. The individuals' preferences over two goods are can be represented by the following utility functions: U*(x;,.x; ) = min (2.x,x; ) and U* (x;,x;) = min(x;.2x, ). Initial endowments are 10 x, (individual A), and 10 x, (individual B). Calculate the price ratio which yields an equilibrium in the exchange market.
Joe and Martin, two roommates, have access to music in digital and analog formats. Each are initially endowed with 8 GB of high-resolution digital music and 4 vinyl LP's (analog) per month (there are a total of 16 GB's of music in digital and 8LP's in this case). Joe's preferences for music in digital and analog formats are represented by the utility function u, (D, A) = 2D + 2A, where D is the amount of digital music in GB's and A is the numberofLP's. Martin's utility function is um(D,A)=D+4A. 1. Draw an Edgeworth box to show the initial endowments and the indifference curves (going through the initial endowments) for Joe and Martin. What are their utility levels from the initial endowments? 2. Calculate the marginal rates of substitution for Joe and Martin. Provide an economic interpretation. 3. Do the initial endowments represent a Pareto efficient allocation? Discuss. 4. If Joe convinces Martin to exchange music at terms which would leave Martin at his initial utility level (i.e.,…
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