xya) Consider an economy with 3 agents, Mohammed (M), David (D) and Susan (S). There aretwo goods available, good x, and good y. The marginal rates of substitution (where good x ison the horizontal axis and good y is on the vertical axis) are given by MRSM = 2yM/XM forMohammed, MRS 2y/x for David and MRS = y/x for Mohammed and David areboth consuming twice as much of the good x than good y, while Susan is consuming equalamounts of x and y. What are the conditions for Pareto efficiency in an exchange economy?Are these consumption levels economically efficient? Can these consumption allocationsbe observed in a perfectly competitive equilibrium in an exchange economy withoutproduction? Explain.b) There are two firms in the economy. Each firm employs positive amounts of capital andlabour. The technology satisfies diminishing marginal rate of technical substitution of labourfor capital. Currently, A's marginal rate of technical substitution of labour for capital is 4while B's marginal rate of technical substitution of labour for capital is 2. Is the currentproduction of the two firms efficient? If not, describe an exchange of inputs that wouldimprove efficiency. Can these production levels of the two firms be observed in a perfectlycompetitive equilibrium of a production and exchange economy? Explain.c) State the first theorem of welfare economics of a production and exchange economy.Which conditions must be satisfied for the Pareto efficiency of an allocation of a productionand exchange economy (assuming that all goods are used, produced and consumed instrictly positive quantities)? Discuss and explain.

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= xy a) Consider an economy with 3 agents, Mohammed (M), David (D) and Susan (S). There are two goods available, good x, and good y. The marginal rates of substitution (where good x is on the horizontal axis and good y is on the vertical axis) are given by MRS 2yM/X for Mohammed, MRS = 2y/x for David and MRSS = y/x for Mohammed and David are both consuming twice as much of the good x than good y, while Susan is consuming equal amounts of x and y. What are the conditions for Pareto efficiency in an exchange economy? Are these consumption levels economically efficient? Can these consumption allocations be observed in a perfectly competitive equilibrium in an exchange economy without production? Explain.

= xy a) Consider an economy with 3 agents, Mohammed (M), David (D) and Susan (S). There are two goods available, good x, and good y. The marginal rates of substitution (where good x is on the horizontal axis and good y is on the vertical axis) are given by MRS 2yM/X for Mohammed, MRS = 2y/x for David and MRSS = y/x for Mohammed and David are both consuming twice as much of the good x than good y, while Susan is consuming equal amounts of x and y. What are the conditions for Pareto efficiency in an exchange economy? Are these consumption levels economically efficient? Can these consumption allocations be observed in a perfectly competitive equilibrium in an exchange economy without production? Explain.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Hey could you please answer the following question l would appreciate it.
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