Amy and Barbara share an office. They put a scent diffuser in the middle of the room, and they need to buy essence oil (G) to make the office smell good. They each can also buy cookies (x) as their own snacks. Each of them has $15 to spend on essence oil and cookies. Amy and Barbara's utility functions are UA (TA, GA, GB) = x²(GA+GB)² and uB (TB, GA, GB) = x3 (GA+GB)³, where A and B are Amy's and Barbara's individual cookie consumption, and GA and GB are respectively Amy's and Barbara's contributions in dollars for the purchase of the essence oil. Let the price of cookies be p = 1 and the price of essence oil be pg = 1. Thus, given GA and GB, G = GA + Gg is the total amount the essence oil that will be purchased, what is the Pareto optimal amount of the total contribution of G? a. 15 C b. 10 c. They will be no difference between the individual decision and the Pareto optimal decision. d. 5

Amy and Barbara share an office. They put a scent diffuser in the middle of the room, and they need to buy essence oil (G) to make the office smell good. They each can also buy cookies (x) as their own snacks. Each of them has $15 to spend on essence oil and cookies. Amy and Barbara's utility functions are UA (TA, GA, GB) = x²(GA+GB)² and uB (TB, GA, GB) = x3 (GA+GB)³, where A and B are Amy's and Barbara's individual cookie consumption, and GA and GB are respectively Amy's and Barbara's contributions in dollars for the purchase of the essence oil. Let the price of cookies be p = 1 and the price of essence oil be pg = 1. Thus, given GA and GB, G = GA + Gg is the total amount the essence oil that will be purchased, what is the Pareto optimal amount of the total contribution of G? a. 15 C b. 10 c. They will be no difference between the individual decision and the Pareto optimal decision. d. 5

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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