Bundle: Principles of Economics, Loose-leaf Version, 8th + LMS Integrated MindTap Economics, 2 terms (12 months) Printed Access Card
8th Edition
ISBN: 9781337607735
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Chapter 22, Problem 5PA
To determine
The validation of the statement based on Arrow's impossibility theorem.
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Ken walks into an ice-cream parlor.Waiter: “We have vanilla and chocolate today.”Ken: “I’ll take vanilla.”Waiter: “I almost forgot. We also have strawberry.”Ken: “In that case, I’ll take chocolate.”What standard property of decision making is Kenviolating? (Hint: Reread the section on Arrow’simpossibility theorem.)
Suppose that 2 roommates, Andy and Bob, are trying to pick an apartment in Chicago. Locations can be chosen from set of alternatives A={ x: x exists [0,1]}. Andy and Bob both want to minimize their daily commute but they work at different locations: Andy at xA=0.3, while Bob at xB=0.6. Specifically, their utility functions are: ui(x)= -(x-xi)2.
Question: What is the set of all Pareto Efficient outcomes in A, assuming no money can be exchanged.
Tom and Jerry are room mates. They spend a total of 80 hours a week together in
their room. Tom likes loud music, even when he sleeps. His utility function is
UT(CT, M) = CT + M,
where CT is the number of cookies he eats per week and M is the number of hours of
loud music per week that is played while he is in their room. Jerry hates all kinds of
music. His utility function is
M²
12
UJ = CJ
Every week, Tom and Jerry each get 12 chocolate chip cookies sent from home. They
have no other source of cookies. We can describe this situation with a box that looks
like an Edgeworth box. The box has cookies on the horizontal axis and hours of music
on the vertical axis. Let the bottom-left corner be the origin for Tom, and the
bottom-right corner be the origin for Jerry.
Suppose the dorm's policy is "rock-n-roll is good for the soul." Thus, M=80 in the
initial endowment. Consider a trade between Tom and Jerry: Jerry gives Tom one
cookie for reducing one hour of music. Then the change in Jerry's…
Chapter 22 Solutions
Bundle: Principles of Economics, Loose-leaf Version, 8th + LMS Integrated MindTap Economics, 2 terms (12 months) Printed Access Card
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