Alice (A) and Bob (B) have an endowment of goods 1 and 2, with Alice's endowment being (wf, wg) = (1, 2) and Bob's endowment equals (wł, w}) = (1,3). Alice's utility is given by u4 (xf', xf) = 2 ln ¤f + In æg , while Bob's utility is uB(x?, x}) = ln ¤{ +2 ln ¤?. Suppose that the social planner considers it to be imperative that agent B consumes exactly one unit of good 1 and four units of good 2. Although the social planner can not force the individuals to a particular consumption, they can enforce transfers of good 1 between the consumers (transfers of good 2 are not enforceable by the social planner). What transfer of good 1 would guarantee that in the resulting competitive Walrasian equilibrium consumer B consumes one unit of good 1 and four units of good 2? Select one: O a. One half unit of good 1 has to be transferred from agent A to agent B. O . 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. O c. One unit of good 1 has to be transferred from agent A to agent B. Od. Transferring good 1 is not sufficient. It is necessary to transfer one unit of good 2 from agent A to agent B.
Alice (A) and Bob (B) have an endowment of goods 1 and 2, with Alice's endowment being (wf, wg) = (1, 2) and Bob's endowment equals (wł, w}) = (1,3). Alice's utility is given by u4 (xf', xf) = 2 ln ¤f + In æg , while Bob's utility is uB(x?, x}) = ln ¤{ +2 ln ¤?. Suppose that the social planner considers it to be imperative that agent B consumes exactly one unit of good 1 and four units of good 2. Although the social planner can not force the individuals to a particular consumption, they can enforce transfers of good 1 between the consumers (transfers of good 2 are not enforceable by the social planner). What transfer of good 1 would guarantee that in the resulting competitive Walrasian equilibrium consumer B consumes one unit of good 1 and four units of good 2? Select one: O a. One half unit of good 1 has to be transferred from agent A to agent B. O . 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. O c. One unit of good 1 has to be transferred from agent A to agent B. Od. Transferring good 1 is not sufficient. It is necessary to transfer one unit of good 2 from agent A to agent B.
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![QUESTION 1
Alice (A) and Bob (B) have an endowment of goods 1 and 2, with Alice's endowment being (w4, ws) = (1, 2) and Bob's endowment equals
(wł, w}) = (1,3). Alice's utility is given by u4 (xf, xf) = 2 ln xf + In xf, while Bob's utility is uB(x}, x}) = ln xf +2 ln a.
Suppose that the social planner considers it to be imperative that agent B consumes exactly one unit
of good 1 and four units of good 2. Although the social planner can not force the individuals to a particular consumption, they can enforce
transfers of good 1 between the consumers (transfers of good 2 are not enforceable by the social planner). What transfer of good 1 would
guarantee that in the resulting competitive Walrasian equilibrium consumer B consumes one unit of good 1 and four units of good 2?
Select one:
O a.
One half unit of good 1 has to be transferred from agent A to agent B.
Ob.
There is no endowment for which agent B would consume xf = 1 and x
= 4 in the corresponding competitive equilibrium.
Therefore, no such transfers exist.
O C.
One unit of good 1 has to be transferred from agent A to agent B.
Od.
Transferring good 1 is not sufficient. It is necessary to transfer one unit of good 2 from agent A to agent B.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F996d8ab9-44fa-4b50-a576-902ff26f6d9c%2Fecfe8bb2-1a84-4803-b870-ccfdf7755607%2F6dkx2xf_processed.png&w=3840&q=75)
Transcribed Image Text:QUESTION 1
Alice (A) and Bob (B) have an endowment of goods 1 and 2, with Alice's endowment being (w4, ws) = (1, 2) and Bob's endowment equals
(wł, w}) = (1,3). Alice's utility is given by u4 (xf, xf) = 2 ln xf + In xf, while Bob's utility is uB(x}, x}) = ln xf +2 ln a.
Suppose that the social planner considers it to be imperative that agent B consumes exactly one unit
of good 1 and four units of good 2. Although the social planner can not force the individuals to a particular consumption, they can enforce
transfers of good 1 between the consumers (transfers of good 2 are not enforceable by the social planner). What transfer of good 1 would
guarantee that in the resulting competitive Walrasian equilibrium consumer B consumes one unit of good 1 and four units of good 2?
Select one:
O a.
One half unit of good 1 has to be transferred from agent A to agent B.
Ob.
There is no endowment for which agent B would consume xf = 1 and x
= 4 in the corresponding competitive equilibrium.
Therefore, no such transfers exist.
O C.
One unit of good 1 has to be transferred from agent A to agent B.
Od.
Transferring good 1 is not sufficient. It is necessary to transfer one unit of good 2 from agent A to agent B.
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