Tom and Jerry are roommates. They spend a total of 80 hours a week together in their
Question:
(a) Suppose the dorm’s policy is that you must have your roommate’s permission to play music. The initial endowment in this case denotes the situation if Tom and Jerry make no deals. There would be no music, and each person would consume 2 dozen cookies a week. Mark this initial endowment on the box above with the label A. Use red ink to sketch the indifference curve for Tom that passes through this point, and use blue ink to sketch the indifference curve for Jerry that passes through this point. Use blue ink to shade in the points representing situations that would make both roommates better off than they are at point A.
(b) Suppose, alternatively, that the dorm’s policy is “rock-n-roll is good for the soul.” You don’t need your roommate’s permission to play music. Then the initial endowment is one in which Tom plays music for all of the 80 hours per week that they are in the room together and where each consumes 2 dozen cookies per week. Mark this endowment point in the box above and label it B. Use red ink to sketch the indifference curve for Tom that passes through this point, and use blue ink to sketch the indifference curve for Jerry that passes through this point. Given the available resources, can both Tom and Jerry be made better off than they are at point B?
Fantastic news! We've Found the answer you've been seeking!
Step by Step Answer:
Related Book For
Question Posted: