Consider a small closed economy with two consumption goods: good 1 (meat) and good 2 (berries). There are two types of agents, h and g, and they have the same preferences over consumption, represented by the utility function: u(¤1,72) = In z1 + In z2. However, there are twice as many type-h agents as type-g agents. The only factors of production are their labour. When a type-h agent chooses to spend a fraction a of his day producing meat and the rest producing berries then his output is (yf', y;) = (2a, 2(1 – a)). A type-g agent is more productive. When she chooses to spend a fraction B of her day producing meat and the rest producing berries then her output is (vĩ, v5) = (38, 12(1 – B)). Remembering that there are twice as many agents of type h than those of type g, what is the equilibrium price p? a. p= 3. O b. p= 1. O c. p= 2. O d. p= 4. O O O O

Consider a small closed economy with two consumption goods: good 1 (meat) and good 2 (berries). There are two types of agents, h and g, and they have the same preferences over consumption, represented by the utility function: u(¤1,72) = In z1 + In z2. However, there are twice as many type-h agents as type-g agents. The only factors of production are their labour. When a type-h agent chooses to spend a fraction a of his day producing meat and the rest producing berries then his output is (yf', y;) = (2a, 2(1 – a)). A type-g agent is more productive. When she chooses to spend a fraction B of her day producing meat and the rest producing berries then her output is (vĩ, v5) = (38, 12(1 – B)). Remembering that there are twice as many agents of type h than those of type g, what is the equilibrium price p? a. p= 3. O b. p= 1. O c. p= 2. O d. p= 4. O O O O

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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