Persons A and B are roommates. Person A smokes and Person B does not. The index smeasures how smoky the room is. It varies from s=0, where there is no smoke in the room, tos=1, when the room is filled with smoke. Thus, 1-s measures how "clean" the air in the room is.Person A's utility function is UA(XA,S)=XA+In(1+s), where xA is the amount of money Person Aowns. Person B's utility function is uB(XB,1s)%3D3XB+2(1-s), where Xg is the amount of moneyPerson B owns. Each person starts with an endowment of 5 units of money. Persch B has thelegal right to a smoke-free room and there is a market for "emission right." At the Walrasianequilibrium, what will be the (per unit of smoke index) price p of the emission rights if the price ofmoney is 1?O a. None of the other answers.O b. p=2/3O c. p=1O d. p=3/2О е. р31/6

The term "Walrasian equilibrium" in economics refers to a situation in which all people maximise…

Persons A and B are roommates. Person A smokes and Person B does not. The index s measures how smoky the room is. It varies from s=0, where there is no smoke in the room, to s=1, when the room is filled with smoke. Thus, 1-s measures how "clean" the air in the room is. Person A's utility function is uд(XA,S)=XA+In(1+s), where xд is the amount of money Person A owns. Person B's utility function is uẞ(XB,1s)=3x+2(1-s), where XB is the amount of money Person B owns. Each person starts with an endowment of 5 units of money. Persch B has the legal right to a smoke-free room and there is a market for "emission right." At the Walrasian equilibrium, what will be the (per unit of smoke index) price p of the emission rights if the price of money is 1? a. None of the other answers. O b. p=2/3 O c. p=1 O d. p=3/2 O e. p=1/6

Persons A and B are roommates. Person A smokes and Person B does not. The index s measures how smoky the room is. It varies from s=0, where there is no smoke in the room, to s=1, when the room is filled with smoke. Thus, 1-s measures how "clean" the air in the room is. Person A's utility function is uд(XA,S)=XA+In(1+s), where xд is the amount of money Person A owns. Person B's utility function is uẞ(XB,1s)=3x+2(1-s), where XB is the amount of money Person B owns. Each person starts with an endowment of 5 units of money. Persch B has the legal right to a smoke-free room and there is a market for "emission right." At the Walrasian equilibrium, what will be the (per unit of smoke index) price p of the emission rights if the price of money is 1? a. None of the other answers. O b. p=2/3 O c. p=1 O d. p=3/2 O e. p=1/6

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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