Consider the pure exchange economy with 2 goods, good 1 and good 2, and two consumers, consumer A and consumer B. The consumers have the following utility functions: uA(X1A,X2A)=x1A+3x2A; UB(X1B,X2B)=x1B +X2B- Consumer A is initially endowed with 4 units of good A and no unit of good 2, that is, consumer A's initial endowment is (W1A,W2a)=(4,0). Consumer B is initially endowed with 3 units of good 2 and no unit of good 1, that is, (W1B,W2B)=(0,3). In order to implement the allocation (x1a,X2a)=(0,1), (x1B,X2B)=(4,2) as a Walrasian equilibrium, what transfer of wealth should we make between the consumers if good 1 is the numeraire, that is, if p1 =1? a. An amount 7 of wealth should be transferred from consumer A to consumer B. O b. None of the other answers. O c. An amount 3 of wealth should be transferred from consumer A to consumer B. O d. An amount 3 of wealth should be transferred from consumer B to consumer A. е. An amount 7 of wealth should be transferred from consumer B to consumer A.

Consider the pure exchange economy with 2 goods, good 1 and good 2, and two consumers, consumer A and consumer B. The consumers have the following utility functions: uA(X1A,X2A)=x1A+3x2A; UB(X1B,X2B)=x1B +X2B- Consumer A is initially endowed with 4 units of good A and no unit of good 2, that is, consumer A's initial endowment is (W1A,W2a)=(4,0). Consumer B is initially endowed with 3 units of good 2 and no unit of good 1, that is, (W1B,W2B)=(0,3). In order to implement the allocation (x1a,X2a)=(0,1), (x1B,X2B)=(4,2) as a Walrasian equilibrium, what transfer of wealth should we make between the consumers if good 1 is the numeraire, that is, if p1 =1? a. An amount 7 of wealth should be transferred from consumer A to consumer B. O b. None of the other answers. O c. An amount 3 of wealth should be transferred from consumer A to consumer B. O d. An amount 3 of wealth should be transferred from consumer B to consumer A. е. An amount 7 of wealth should be transferred from consumer B to consumer A.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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