7 Suppose that Morris has preferences on books and wine represented by the utilityfunction U(b, r) b+w while Philip has preferences on these goods represented by theutility function U(b, w)- bue. Suppose that the total amount of wine is the same as that ofbooks. If we draw an Edgeworth box with books on the horizontal axis and wine on thevertical axis and if we measure Morris's consumptions from the lower left coner of the box.then the contract curve (Pareto set) contains:none of the other answers are correcta straight line with slope 1 passing through the origin and the upper right corner of thebox.a curve that gets flatter as you move from left to right.Oa vertical line running from the upper right corner of the box to the lower right comera curve that gets steeper as you move from left to right.

We need to find the contract curve here. The formula for contract curve is given by: Contract Curve…

Suppose that Morris has preferences on books and wine represented by the utility function Ub, w)=b+w while Philip has preferences on these goods represented by the utility function U(b, w)- be. Suppose that the total amount of wine is the same as that of books. If we draw an Edgeworth box with books on the horizontal axis and wine on the vertical axis and if we measure Morris's consumptions from the lower left corner of the box. then the contract curve (Pareto set) contains: none of the other answers are correct a straight line with slope 1 passing through the origin and the upper right corner of the box. a curve that gets flatter as you move from left to right. a vertical line running from the upper right corner of the box to the lower right comer Oa curve that gets steeper as you move from left to right.

Suppose that Morris has preferences on books and wine represented by the utility function Ub, w)=b+w while Philip has preferences on these goods represented by the utility function U(b, w)- be. Suppose that the total amount of wine is the same as that of books. If we draw an Edgeworth box with books on the horizontal axis and wine on the vertical axis and if we measure Morris's consumptions from the lower left corner of the box. then the contract curve (Pareto set) contains: none of the other answers are correct a straight line with slope 1 passing through the origin and the upper right corner of the box. a curve that gets flatter as you move from left to right. a vertical line running from the upper right corner of the box to the lower right comer Oa curve that gets steeper as you move from left to right.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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