a. If the market for x and y were perfectly competitive, whatlevels of those goods would be produced? What wouldthe typical individual's utility be in this situation?b. What are the optimal production levels for x and y?What would the typical individuals utility level be? Howshould consumption of good y be taxed to achieve thisresult? Hint: The numbers in this problem do not comeout evenly, and some approximations should suffice. Suppose the production possibility frontier for an economythat produces one public good (x) and one private good (y)is given by100x + y = 5,000.This economy is populated by 100 identical individuals, eachwith a utility function of the formutility = Vxy,where y, is the individual's share of private good production(= y/100). Notice that the public good is nonexclusive andthat everyone benefits equally from its level of production.

Suppose the production possibility frontier for an economy that produces one public good (x) and one private good (y) is given by 100x² + y = 5,000. This economy is populated by 100 identical individuals, each with a utility function of the form utility = Vxy, where y, is the individual's share of private good production Yi (= y/100). Notice that the public good is nonexclusive and that everyone benefits equally from its level of production.

Suppose the production possibility frontier for an economy that produces one public good (x) and one private good (y) is given by 100x² + y = 5,000. This economy is populated by 100 identical individuals, each with a utility function of the form utility = Vxy, where y, is the individual's share of private good production Yi (= y/100). Notice that the public good is nonexclusive and that everyone benefits equally from its level of production.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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