Consider an economy with 3 agents, Mohammed (M), David (D) and Susan (S). There are two goods available, good x, and good y. The marginal rates of substitution (where good x is on the horizontal axis and good y is on the vertical axis) are given by for Mohammed, for David and for Suzan. Mohammed and David are both consuming twice as much of the good x than good y, while Susan is consuming equal amounts of x and y. (image of functions and equations attached)A. What are the conditions for Pareto efficiency in an exchange economy? Are these consumption levels economically efficient? B. Can these consumption allocations be observed in a perfectly competitive equilibrium in an exchange economy without production? Explain. =a) Consider an economy with 3 agents, Mohammed (M), David (D) and Susan (S). There aretwo goods available, good x, and good y. The marginal rates of substitution (where good x ison the horizontal axis and good y is on the vertical axis) are given by MRSM 2yM/xM forMohammed, MRS = 2₁/x for David and MRS ys/xs for Suzan. Mohammed andDavid are both consuming twice as much of the good x than good y, while Susan is consumingequal amounts of x and y. What are the conditions for Pareto efficiency in an exchangeeconomy? Are these consumption levels economically efficient? Can these consumptionallocations be observed in a perfectly competitive equilibrium in an exchange economy withoutproduction? Explain.

The marginal rate of substitution is the quantity of one thing that a person is willing to give up…

Answered: onsider an economy with 3 agents,…

ENGR.ECONOMIC ANALYSIS

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ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

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Consider an economy with 3 agents, Mohammed (M), David (D) and Susan (S). There are two goods available, good x, and good y. The marginal rates of substitution (where good x is on the horizontal axis and good y is on the vertical axis) are given by for Mohammed, for David and for Suzan. Mohammed and David are both consuming twice as much of the good x than good y, while Susan is consuming equal amounts of x and y. (image of functions and equations attached)

A. What are the conditions for Pareto efficiency in an exchange economy? Are these consumption levels economically efficient?

B. Can these consumption allocations be observed in a perfectly competitive equilibrium in an exchange economy without production? Explain.

=
a) Consider an economy with 3 agents, Mohammed (M), David (D) and Susan (S). There are
two goods available, good x, and good y. The marginal rates of substitution (where good x is
on the horizontal axis and good y is on the vertical axis) are given by MRSM 2yM/xM for
Mohammed, MRS = 2₁/x for David and MRS ys/xs for Suzan. Mohammed and
David are both consuming twice as much of the good x than good y, while Susan is consuming
equal amounts of x and y. What are the conditions for Pareto efficiency in an exchange
economy? Are these consumption levels economically efficient? Can these consumption
allocations be observed in a perfectly competitive equilibrium in an exchange economy without
production? Explain.

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