Consider a small closed economy with two consumption goods: good 1 (meat) and good 2 (berries). Thereare two types of agents, h and g, and they have the same preferences over consumption, represented bythe utility function: u(x1, x2) = In ¤1 + In x2. However, there are twice as many type-h agents as type-gagents.The only factors of production are their labour. When a type-h agent chooses to spend a fraction a of hisday producing meat and the rest producing berries then his output is (yf, y5) = (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 therest producing berries then her output is (yi, y)(38, 12(1 – B)).Normalise the price of one unit of berries (good 2) to 1, and let p be the price of one unit of meat (good 1).Which of the following statements is true? Consider the setup from Question 1. Which of the following statements is correct?Given equilibrium price p, each agent of type h demands one unit of good 1 (meat) and p units of good 2 (berries). Eachagent of type g demands 6/p units of good 1 (meat) and 6 units of good 2 (berries).a.O b. Given equilibrium price p, each agent of type h demands 1/p unit of good 1 (meat) and l units of good 2 (berries). Eachagent of type g demands 6 units of good 1 (meat) and 6/p units of good 2 (berries).О с.Given equilibrium price p, each agent of type h demands one unit of good 1 (meat) and one units of good 2 (berries). Eachagent of type g demands six units of good 1 (meat) and six units of good 2 (berries).O d. Given equilibrium price p, each agent of type h demands 6/p units of good 1 (meat) and 6 units of good 2 (berries). Eachagent of type g demands one unit of good 1 (meat) and punits of good 2 (berries).

A closed economy does not trade with other countries. As a result, the closed economy is entirely…

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(x1, x2) = In x1 + In x2. 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, y5) = (2a, 2(1 – a)). A type- g agent is more productive. When she chooses to spend a fraction Bof her day producing meat and the rest producing berries then her output is (yi, yž) = (38, 12(1 – B)). Normalise the price of one unit of berries (good 2) to 1, and let p be the price of one unit of meat (good 1). Which of the following statements is true?

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(x1, x2) = In x1 + In x2. 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, y5) = (2a, 2(1 – a)). A type- g agent is more productive. When she chooses to spend a fraction Bof her day producing meat and the rest producing berries then her output is (yi, yž) = (38, 12(1 – B)). Normalise the price of one unit of berries (good 2) to 1, and let p be the price of one unit of meat (good 1). Which of the following statements is true?

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter13: General Equilibrium And Welfare

Section: Chapter Questions

Problem 13.2P

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