Two goods are produced in a two-person economy - good X and good Y. Person A's production possibilities frontier is given by the formula X+Y=A, while Person B's production possibilities frontier is 2X+Y=B (where A, B > 0 and A< B < 2A). The utility function of this two-person society is described by the formula U(X,Y)= XY2. The optimal consumption level in this economy is: A+B 3 2A+B 6 2(A+B) . a. X = and Y = X = and Y = b. X = and Y = A+B C. X = and Y = 3 d. With such data it is not possible to unambiguously determine the consumption level. 2A+B 6 or 3 2(2A+B) 3 2(2A+B) 3 2(A+B) 3 X

Two goods are produced in a two-person economy - good X and good Y. Person A's production possibilities frontier is given by the formula X+Y=A, while Person B's production possibilities frontier is 2X+Y=B (where A, B > 0 and A< B < 2A). The utility function of this two-person society is described by the formula U(X,Y)= XY2. The optimal consumption level in this economy is: A+B 3 2A+B 6 2(A+B) . a. X = and Y = X = and Y = b. X = and Y = A+B C. X = and Y = 3 d. With such data it is not possible to unambiguously determine the consumption level. 2A+B 6 or 3 2(2A+B) 3 2(2A+B) 3 2(A+B) 3 X

ENGR.ECONOMIC ANALYSIS

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ISBN:9780190931919

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Chapter1: Making Economics Decisions

Section: Chapter Questions

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Welfare Analysis

Welfare analysis of the society is related to welfare economics. From the economic point of view former welfare economics refers to that subject which uses the techniques of microeconomics to analyse and evaluate the welfare at the economic or aggregate level.

Question

Two goods are produced in a two-person economy
- good X and good Y. Person A's production
possibilities frontier is given by the formula X+Y=A,
while Person B's production possibilities frontier is
2X+Y=B (where A, B > 0 and A< B < 2A). The utility
function of this two-person society is described by
the formula U(X,Y)= XY2. The optimal
consumption level in this economy is:
a. X = A+B and Y =
3
2A+B
and Y =
and Y =
X =
b. X =
C. X
6
2A+B
6
A+B
3
=
2(A+B)
or
3
2(2A+B)
3
2(2A+B)
3
2(A+B)
3
and Y =
d. With such data it is not possible to
unambiguously determine the
consumption level.
X

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