3. First and Second Welfare TheoremsThere are two goods A and B and two inputs K and L. The production functions areYaAK,L1-8The production functions display the standard properties, including constant returnsto scale.A representative household has utilityU(Ca, Ch)whereis the consumption of good i. The total supply of each factor is fixedCiKKa + K,La + L, (b) Now assume a market system.i. Households own the labor and capital, which is rented to firms. The householdfaces a budget constraintwaLa + wLb +raKa+ r¿K½ > PaCa + PhCbwhere wi is the real wage paid in industry i and r; is the rental rate inindustry i. The total supply of each factor is fixed, as described above. Solvethe household's maximization problem.ii. Firms maximize profits. A firm's profits in industry A areTa = PaFa(Ka, La) – waLa – raKaand a firm's profits in industry B areTb = P3F6(Kb, Ls) – w„Ln – r¿K,Solve the maximization problem for each firm.iii. State the equilibrium conditions assuming households and firms are price-takers.(c) Demonstrate how the two allocations - the solution to the social planning problemand the competitive equilibrium - are equivalent. Provide a statement of the Firstand Second Welfare theorems using this example.

First welfare theorem states that economy is in equilibrium in pareto optimal condition when perfect…

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ENGR.ECONOMIC ANALYSIS

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Dollars 9 490 MC ATC 9 MR Output h] Refer to the diagram. Equilibrium price is Mutiple Choice
Question 10 General Equilibrium and Social Welfare 1. Precisely define 'Pareto improvement. 2. Precisely define 'Pareto efficiency'. 3. BONUS: Pick either i) the Utilitarian (developed by Jeremy Bentham, the guy you saw in the lecture video and whose stuffed body is displayed inside my old college, University College London) or ii) the Rawlsian social welfare function. Define it (in words or using a formula). Then explain what the social welfare function you picked implies for the allocation of goods between people.
Σ 3. 21 Pric 2. Unit 2 Progress Check FRQ 5. 2. 0 12 3 4 5 6 7 8 9 10 Quantity (millions of cases) Assume that sugar-based soft drinks are produced in a market shown on the graph above. Answer the following questions based on the information given in the graph. (a) To reduce the consumption of sugary soft drinks, suppose the government imposes a $2 per-unit sales tax on soft drinks. ) Will the price of soft drinks increase by the full amount of the sales tax? Explain. (1) Calculate the tax revenue the government can collect from the sale of soft drinks. Show your work. (iii) Will the consumer surplus increase, decrease, or stay the same after the tax? (iv) Calculate the deadweight loss created by the tax. Show your work. (b) Suppose that instead of imposing the per-unit sales tax, the government sets a price ceiling of $7. Identify the quantity of soft drinks that will be exchanged in the market as a result of the price ceiling. Explain. SUE esc ->
a) State and explain Arrow’s Impossibility Theorem and its implications for social choice. b) State and explain the First and Second Welfare Theorem and discuss their economic implication and significance. c) Explain the concept of minimum efficient scale and its relevance for determining when a market is likely to become a monopoly or a competitive market.
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person 1 can allocate her 8 hour day between the production of two goods: A and B. Each hour devoted to good B yeilds 2units . whereas each hour devoted to good A produces 4 units. state whether 9 units of good B and 12 units of good A are unattainable, efficient, or inefficient.(state all that applies) select one or more attainable inefficient efficient unattainable
6. In a simple economy there are 2 inputs, each fixed in supply. These inputs are owned by two consumers. Inputs are used either in the production of r or of y. For simplicity you should assume there are only two firms. (a) Define the term 'Pareto Efficient (PE) Allocation." (b) What conditions must be satisfied for a PE allocation in this simple economy? List each separately
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Angela's reservation indifference curve, IC, After the new law Bruno 12 gets rent EF Can Angela be better off, without reducing Bruno's 8- rent? IC, EN D' Feasible frontier: Angela and Bruno combined 16 20 Angela's hours of free time a) Angela works farmland owned by Bruno. Use the framework above and a test for Pareto efficiency to establish that points on the line EF are not Pareto efficient while points on the line CD are. b) Given that Angela and Bruno achieve a Pareto optimum explain briefly why the division of output may not be equitable. Bushels of grain 24
Person 1 can allocate her 8-hour day between the production of two goods.A and B .Each hour devoted to Good B yields 2 units whereas each hour devoted to Good A produces 4 units State weather 9 units of Goods B and 12 units of Goods A are attainable ,unattainable, efficient or inefficient. State all that applies
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Second Welfare Theorems There are two goods A and B and two inputs K and L. The production functions are AK L-a BK{L;- Ya %3D 1-3 %3D