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Astrid’s utility function is UA(HA,CA) = HA · CA. Birger’s utility function is UB(HB,CB) = min{HB , CB }. If Astrid’s initial endowment is no cheese and 5 units of herring and if Birger’s initial endowments are 6 units of cheese and no herring, then where p is a competitive
i. 6/(p+1)+2.5=5.
ii. 5/6 = p.
iii. 6/p + 5/2p = 5.
iv. 6/5 = p.
v. min{5, 6} = p.
The answer is i.
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- e E L E 11- esc CENGAGE MINDTAP Chapter 07 Homework Consider the market for electric vehicles. The market price of each electric vehicle is $340,000, and each consumer demands no more than one electric vehicle. Suppose that Antonio is the only consumer in the electric vehicle market. Their willingness to pay for an electric vehicle is $595,000. Based on Antonio's willingness to pay, the following graph shows his demand curve for electric vehicles. PRICE (Thousands of dollars) Shade the area representing Antonio's consumer surplus using the green rectangle (triangle symbols). 680 595 1 ! 510 425 3:0 255 170 85 0 :0² FI Q A N Antonio's Demand Now, suppose another buyer, Caroline, enters the market for electric vehicles, and her willingness to pay is $425,000. @ 2 GO 2 QUANTITY (Electric vehicles) F2 W S 3 #3 80 F3 E Market Price D $ 4 X C 888 F4 R F Antonio's Consumer Surplus % 5 ng.cengage.com FS T V 6 MacBook Air G (?) F6 Y B & 7 H F7 U N * 8 J DII 1 ( 9 M K ) 0 0 F10 L P Q 90 ABFall 2023/24) Adrienne and Stephen consume pizza, Z, and cola, C. Adrienne's utility function is and Stephen's is Us = (23) 05 (₂) 05 Their endowments are ZA-10, CA = 60, Zg=10, and C=140. What are the competitive equilibrium prices, where one price is normalized to equal one? is S $$ (Enter) UA =ZA CA Determine p, the competitive price of Z, where the price of C is normalized to equal one. Enter your response rounded to two decimal places) The competitive price, p.a) Suppose demand for good X is given by QD = 900- p/2 where p is the price and QD the quantity demanded. Supply is given by QS = p/4. Suppose 60 TL tax is imposed on each unit ofX that is purchased. What is the burden of the tax? Explain the key factors that determine the incidence of the tax. b) Describe the main differences between partial and general equilibrium analysis in the context of examining tax incidence.
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- Alex's utility is U (xA, YA) = min {TA, YA}, where zA, and y, are his consumptions of %3D goods a and y respectively. Becky's utility function is U (zB, YB ) = TBYB where ap and yp are her consumptions of goods a and y. Alex's initial endowment is 20 units of x and 12 units of y. Becky's initial endowment is 12 units of x and 20 units of y. At the Walrasian equilibrium, a) Both of them consume 16 units of good y each. b) Alex consumes 8 units of good y and Becky consumes 16 units of y. c) Both of them consumes 12 units of good x each. d) Alex consumes 12 units of good x and Becky consumes 20 units of x. e) None of the aboveDamian and Kira trade in antique cars. They typically buy either 1 or 2 cars at any given time, since they are difficult to find and expensive. The price per car P(Q) where Qis the total number of cars traded at a given time, is determined by the demand equation: K P(Q) 1 where K is a positive constant. If a € {1, 2} is Damian's choice and b = {1,2} is Kira's choice, (so Q = (a + b)) it costs Damian 2a to find and prepare a cars for market, and it costs Kira 3b to get b cars ready for market. Damian has better connections and access the cars before Kira, and so Damian chooses his value of a first. Kira then chooses his value of b, knowing Damian's choice. Their choices are determined by maximising their individual profits, ie the difference between how much they can sell their cars for, minus the total costs to prepare them for sale. (i) Express this game as an extensive form game tree, making sure to fully label all the nodes and links, and especially writing down their payoffs. (ii)…4. Aaron and Burris have the following utility functions over two goods, x and y. Aaron’s utility function: UA(xA, yA) = min{xA/3, yA} Burris’s utility function: UB(xB, yB) = 9xB + 3yB Aaron’s endowment is eA = (2, 4). Burris’ endowment is eB = (10, 8). In an Edgeworth Box diagram, show which allocations are in the core. Solve for the set of Pareto optimal allocations (i.e. the contract curve) in the Edgeworth Box. Illustrate the contract curve in an Edgeworth Box diagram. Let good y be the numeraire (i.e. set py = 1 and let px = p). Solve for the Walrasian competitive equilibrium allocation and price ratio.
- Smith and Jones are stranded on a desert island. Each has in her possession some slices of ham (H) and cheese (C). Smith prefers to consume ham and cheese in the fixed proportion of 2 slices of cheese to each slice of ham. Her utility function is given by Us = min(10H, 5C). Jones, on the other hand, regards ham and cheese as substitutes – she is always willing to trade 3 slices of ham for 4 slices of cheese, and her utility function is given by UJ = 4H + 3C. Total endowments are 100 slices of ham and 200 slices of cheese. a. Draw the Edgeworth Box diagram for all possible exchanges in this situation. What is the contract curve for this exchange economy? b. Suppose Smith’s initial endowment is 40 slices of ham and 80 slices of cheese (Jones has the remaining ham and cheese as her initial endowment). What mutually beneficial trades are possible in this economy and what utility levels will Smith and Jones enjoy from such trades? c. Now imagine a new endowment in which Smith has 60 slices…If cars and gas are complements both sold in competitive markets, and the supply of gas falls, then according to a general equilibrium analysis: Group of answer choices The quantity of cars sold will rise The price of cars will fall The price of cars will rise The price of cars will stay the sameIf the demand shifts outward and the supply shifts outward the new equilibrium quantity will be higher, but the direction of the change in the equilibrium price is ambiguous. the new equilibrium price will be higher, but the direction of the change in the quantity is ambiguous. in the new equilibrium, the price will be higher but the quantity will be lower. in the new equilibium, the quantity will be higher but the price will be lower. in the new equilibrium, both price and quantity will be higher.
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