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The above figure depicts the Edgeworth box for two individuals, Al and Bruce. If the endowment is at point a, and Al has no ability to bargain, the final allocation will be at point
A) a.
B) b.
C) c.
D) d.
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- Q11. If a consumer's net demands are (5, -3) and her endowment is (4,4), what are her gross demands? 2. The prices are (p. Do) = (2.3), and the consumer is currently consumingANS: T DIF: 2 15. Jack Spratt's utility function is U(F, L) I L. His wife's utility function is U(F, L) I F. If Jack's initial endowment is 10 units of F and 5 units of L and if Jack's wife's initial endowment is 6 units of F and 10 units of L, then in an Edgeworth box for Jack and his wife, an allocation of F and L will be Pareto optimal only if it is at a corner of the box. ANS: F DIF: 2 16. Jack Spratt's utility function is U(F, L) I L. His wife's utility function is U(F, L) F. If Jack's initial endowment is 40 units of F and 20 units of L and if Jack's wife's initial endowment is 24 units of F and 40 units of L, then in an Edgeworth box for Jack and his wife, an allocation of F and L will be Pareto optimal only if it is at a corner of the box. ANS: F DIF: 2 17. Jack Spratt's utility function is U(F, L) I L. His wife's utility function is U(F, L) I F. If Jack's initial endowment is 100 units of F and 50 units of L and if Jack's wife's initial endowment is 60 units of F and 100 units…
- Two individuals A and B have utility functions defined over two goods, a private good 'x') and a public good, 'F. The utility function of an agent 'i' is defined by ui = 2 log xi + log F where F =FA + FB. Each agent has 200 units of private goods x, as his endowment and 1 unit of private good can be transformed into 1 public good F. Answer the following (a) Find the Nash equilibrium values of FA and FB? (b) What is the Pareto optimal level of F? (c) In what condition the Pareto optimal level of F will not depend on the number of private goods? (d) What would be the consumption of x by each agent if they contribute equally towards the public good (F)? (e) Would it change if an agent had a larger endowment of x to begin with?(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.!
- !In a two-good market, a consumer starts with an initial endowment of (x₁, x2) = (15.00, 5.00), while the market prices for these goods are given by (P1, P2) = (7.00, 3.00). The consumer has the following utility function: U 0.52 0.48 - Given this information, what will this consumer's final choice of quantity for each good be? x1 = x2 =Note: The answer should be typed.
- Consider an Edgeworth box economy where preferences are given by u'lx},x3) = x} + Inx and uaf,x3) = xi, and the initial endowments are e' = (1,3) and e² = (3,1). Find all the Walrasian equilibrium. You may assume that the solution is inte- rior.B4(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.
