Suppose the economy has 100 units of labor (L) and 100 units of capital (K), and it chooses to allocate three times more labor and capital in the production of good X than in good Y. Suppose also that the production of goods X and Y are represented by the following functions: X = LX0.25KX0.25; Y = 2LY0.25KY0.25. Compute for Lx, Ly, Kx and Ky Calculate the MRTSLK of each firm Is this allocation efficient? How so?
Suppose the economy has 100 units of labor (L) and 100 units of capital (K), and it chooses to allocate three times more labor and capital in the production of good X than in good Y. Suppose also that the production of goods X and Y are represented by the following functions: X = LX0.25KX0.25; Y = 2LY0.25KY0.25.
- Compute for Lx, Ly, Kx and Ky
- Calculate the MRTSLK of each firm
- Is this
allocation efficient ? How so? - How many unit of X and Y will be produced?
Suppose the utility function of the two individuals in the economy is given by UA = 2XA0.5YA0.5 ; UB = XB0.5YB0.5 and X and Y are allocated equally between the two individuals.
- Compute for XA, YA ,XB ,YB
- Calculate the MRSXY of each individual
- Is the allocation efficient? How so?
Determine if at the current allocation, the efficiency in optimal mix attained.
- Compute for MRTXY
- What is the MRSXY?
- Is optimal mix efficiency attained? How so?
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Suppose the utility function of the two individuals in the economy is given by UA = 2XA0.5YA0.5 ; UB = XB0.5YB0.5 and X and Y are allocated equally between the two individuals.
- Compute for XA, YA ,XB ,YB
- Calculate the MRSXY of each individual
- Is the
allocation efficient ? How so?
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