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, when 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 ua(XA,s)=Xa.S, where xA is the amount of money Person A owns. Person B's utility function is ug(Xp, 1s)=Xg .(1-s)³, where Xg is the amount of money Person B owns. Each person starts with an endowment of 5 units of money. Person A has the legal right to a fill up the room with smoke and there exists a market for smoke "abatements". At the Walrasian equilibrium, how much money will person B be left with? O a. Xg=1.25 O b. Xg=2.25 О с. ХB3D0.25 d. Xg=0.25 е. None of the other answers.
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, when 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 ua(XA,s)=Xa.S, where xA is the amount of money Person A owns. Person B's utility function is ug(Xp, 1s)=Xg .(1-s)³, where Xg is the amount of money Person B owns. Each person starts with an endowment of 5 units of money. Person A has the legal right to a fill up the room with smoke and there exists a market for smoke "abatements". At the Walrasian equilibrium, how much money will person B be left with? O a. Xg=1.25 O b. Xg=2.25 О с. ХB3D0.25 d. Xg=0.25 е. None of the other answers.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
![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, when 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 ua(XA,s)=Xa.S, where xA is the amount of
money Person A owns. Person B's utility function is ug(xg, 1s)=Xg .(1-s)³, where xg is the amount of money Person B
owns. Each person starts with an endowment of 5 units of money. Person A has the legal right to a fill up the room
with smoke and there exists a market for smoke "abatements". At the Walrasian equilibrium, how much money will
person B be left with?
а. Хв31.25
ОБ. Хв32.25
O c.
XB=0.25
O d. Xg=0.25
е.
None of the other answers.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F1d1d8b3e-0db7-45bf-acd5-895083820ff4%2Ff302cf3e-6d81-4526-a9ea-55cbeae3213e%2F40zz6ea_processed.png&w=3840&q=75)
Transcribed Image Text: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, when 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 ua(XA,s)=Xa.S, where xA is the amount of
money Person A owns. Person B's utility function is ug(xg, 1s)=Xg .(1-s)³, where xg is the amount of money Person B
owns. Each person starts with an endowment of 5 units of money. Person A has the legal right to a fill up the room
with smoke and there exists a market for smoke "abatements". At the Walrasian equilibrium, how much money will
person B be left with?
а. Хв31.25
ОБ. Хв32.25
O c.
XB=0.25
O d. Xg=0.25
е.
None of the other answers.
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