To start with, consider an economy with no production. There are two consumers in the economy....
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
To start with, consider an economy with no production. There are two consumers in the economy. Consumer 1 has an initial endowment of (130, 190) and has an MRS for these two goods of 2₁ Consumer 2 has an initial x1 endowment of (70, 60) and has an MRS for these two goods of 32. As with the last HW, decimal answers are possible. 1. Show that P = 1 is not a competitive equilibrium price but P = 2 is. 2. Draw an edgeworth box including the initial endowment, the CE allocation, the budget constraint, and the IC for both consumers through the CE allocation. Explain why we know the contract curve is not linear. 3. Suppose that person 2 is considered more important and should, therefore, have a bigger allocation of the goods. So now the initial endowment of person 2 is (96, 225). Show that the new competitive equilibrium allocation ends up with person 1 having (80, 62.5) and person 2 having (120, 187.5) and show that the new equilibrium price is no longer 2. 4. Now there is a change so (200, 250) is just one of many options along a PPF that has a MRT of 5x/2y. Show that now, the CE outcome in (1) is PE but the CE outcome in (3) is not. 5. If (176, 275) is also on the same PPF as the total endowment in #4, find the PE allocation of the goods between the individuals. (Note: This becomes a bit tedious with the algebra since you have to solve 4 equations and 4 unknowns. Just do some substituting. Be careful that when you combine to eliminate an equation, you must also eliminate an unknown. Also, all answers are exact to 2 decimal places) To start with, consider an economy with no production. There are two consumers in the economy. Consumer 1 has an initial endowment of (130, 190) and has an MRS for these two goods of 2₁ Consumer 2 has an initial x1 endowment of (70, 60) and has an MRS for these two goods of 32. As with the last HW, decimal answers are possible. 1. Show that P = 1 is not a competitive equilibrium price but P = 2 is. 2. Draw an edgeworth box including the initial endowment, the CE allocation, the budget constraint, and the IC for both consumers through the CE allocation. Explain why we know the contract curve is not linear. 3. Suppose that person 2 is considered more important and should, therefore, have a bigger allocation of the goods. So now the initial endowment of person 2 is (96, 225). Show that the new competitive equilibrium allocation ends up with person 1 having (80, 62.5) and person 2 having (120, 187.5) and show that the new equilibrium price is no longer 2. 4. Now there is a change so (200, 250) is just one of many options along a PPF that has a MRT of 5x/2y. Show that now, the CE outcome in (1) is PE but the CE outcome in (3) is not. 5. If (176, 275) is also on the same PPF as the total endowment in #4, find the PE allocation of the goods between the individuals. (Note: This becomes a bit tedious with the algebra since you have to solve 4 equations and 4 unknowns. Just do some substituting. Be careful that when you combine to eliminate an equation, you must also eliminate an unknown. Also, all answers are exact to 2 decimal places)
Expert Answer:
Answer rating: 100% (QA)
Definition Type of Variance Fixed overhead volume variance Occurs when budgeted unit production is different from actual unit production Variable over... View the full answer
Related Book For
Posted Date:
Students also viewed these economics questions
-
There are two consumers of mosquito abatement, a public good. Dash's benefit from mosquito abatement is given by MB D = 100 - Q, where Q is the quantity of mosquito abatement. Lilly's benefit is...
-
There are two consumers on the market: Jim and Donna. Jim's utility function is U(x, y) = xy, with associated marginal utility functions MUx = y and MUy = x. Donna's utility function is U(x,y) = x2y,...
-
A common stock pays an annual dividend that increases by 4% annually and sells for $35 per share. If the market rate of return on this stock is 8%. What is the amount of the ?last dividend paid $1.53...
-
Find the sum of the first n terms of 1 + x + x2 +.....
-
Study each of the following case carefully. Briefly state the principle of law and your decision. Hollander purchased a computer from a pawnshop for use in his real estate office. Several weeks...
-
Describe the advantages and disadvantages of electronic medical records.
-
Consider the AE/PC model with time lags. Suppose the economy starts in 2019 with output at potential and constant inflation. In 2020, an adverse supply shock occurs, shifting the Phillips curve up....
-
equation. Using the Laplace transform, solve the following initial-value differential -4y+13y = e+ sin(3t) with y(0) = 4 and y(0) = 3 Question 5. (5 points) Find the inverse Laplace transform of 4...
-
The sequence number field in the TCP header is 32 bits long, which is big enough to cover over 4 billion bytes of data. Even if this many bytes were never transferred over a single connection, why...
-
(30 points) Dan is an old teacher and plans to invest for retirement. He is risk averse so does not want to invest on stocks. However, the current risk-free yield of government bond is too low, 2%....
-
What is the difference between a cash offer and a rights offer for a seasoned equity offering?
-
Identify whether the following assets would be classified as current or non-current at the end of the reporting period. Explain your classification decision. a Cash and cash equivalents b Motor...
-
How can you decide the order of investment in a staged investment decision?
-
What is the average stock price reaction to an SEO?
-
List four types of corporate debt that are typically issued.
-
Demonstrate the utility of database automation. Describe commonly used database automation tools. Describe SQL server integration services (SSIS) data migration software, SQL server analysis services...
-
Ex. (17): the vector field F = x i-zj + yz k is defined over the volume of the cuboid given by 0x a,0 y b, 0zc, enclosing the surface S. Evaluate the surface integral ff, F. ds?
-
Consider a society with only two people, one with an income of $ 200,000 and one with an income of $ 20,000. Assume that under the current tax system, the rich person pays $ 50,000 in taxes and the...
-
Private military firms provided much of the logistical support to American troops in Afghanistan and Iraq, and some people have advocated using such troops to help stop the genocide being carried out...
-
In which of the following markets do you expect efficient outcomes? Why? a. Hurricane insurance for beach houses b. Medical care c. Stock market d. MP3 players e. Loans for students who wish to...
-
Consider the vector \(u\) that consists of 32 equally spaced samples of the function \(f(t) \approx \cos (4 \pi t)\) on the interval [0,1]. That is, \(u_{1}=f(0), u_{2}=\) \(f\left(\frac{1}{32}...
-
Solve the following initial value problem using Laplace transform: (a) \[\frac{d y}{d t}=-y+e^{-3 t}, \quad y(0)=2\] (b) \[\frac{d y}{d t}+11 y=3, \quad y(0)=-2\] (c) \[\frac{d y}{d t}+2 y=2 e^{7 t},...
-
For the scaling numbers \[\begin{aligned}& \alpha_{1}=\frac{1+\sqrt{3}}{4 \sqrt{2}} \\& \alpha_{2}=\frac{3+\sqrt{3}}{4 \sqrt{2}} \\& \alpha_{3}=\frac{3-\sqrt{3}}{4 \sqrt{2}} \\&...
Study smarter with the SolutionInn App