ANS: T DIF: 215.Jack Spratt's utility function is U(F, L) I L. His wife's utility function is U(F, L) I F. If Jack'sinitial endowment is 10 units of F and 5 units of L and if Jack's wife's initial endowment is 6 units of Fand 10 units of L, then in an Edgeworth box for Jack and his wife, an allocation of F and L will be Paretooptimal only if it is at a corner of the box.ANS: F DIF: 216.Jack Spratt's utility function is U(F, L) I L. His wife's utility function is U(F, L) F. If Jack's initialendowment is 40 units of F and 20 units of L and if Jack's wife's initial endowment is 24 units of F and40 units of L, then in an Edgeworth box for Jack and his wife, an allocation of F and L will be Paretooptimal only if it is at a corner of the box.ANS: F DIF: 217.Jack Spratt's utility function is U(F, L) I L. His wife's utility function is U(F, L) I F. If Jack'sinitial endowment is 100 units of F and 50 units of L and if Jack's wife's initial endowment is 60 units ofF and 100 units of L, then in an Edgeworth box for Jack and his wife, an allocation of F and L will bePareto optimal only if it is at a corner of the box.ANS: F DIF: 2

Given information Utility function Jack Utility function U=L His wife utility function U=F Initial…

Jack Spratt's utility function is U(F, L) IL. His wife's utility function is U(F, L) 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 15. 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

Jack Spratt's utility function is U(F, L) IL. His wife's utility function is U(F, L) 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 15. 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

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Suppose there are two consumers A and B, and two goods x and y. A's utility function has the following form UA = XA - (XB)1. Which of the following is true? Consumer A's consumption of good x exhibits a negative externality. Consumer A's consumption of good x exhibits a positive externality. Consumer B's consumption of good x exhibits a negative externality. Consumer B's consumption of good x exhibits a positive externality.
Consider a two-good exchange economy with two types of consumers. Type A have the utility function And an endowment of 3 units of good 1 and k units of good 2. Type B has the utility function And an endowment of 6 units of good 1 and 21 - k units of good 2. a. Find the competitive equilibrium outcome and show that the equilibrium price p* = p1/p2 of good 1 in terms of good 2 is p* = 21+k/15. b. Find the income levels (MA; MB) of both types in equilibrium as a function of k. c. Suppose that the government can make a lump-sum transfer of good 2, but it is impossible to transfer good 1. Use your answer to part b to describe the set of income distributions attainable through such transfers. Draw this in a diagram. d. Suppose that the government can affect the initial distribution of resources by varying k. Find the optimal distribution of income if (i) the SWF is W = log(MA) + log(MB) and (ii) W = MA + MB.
(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.
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