Suppose that there Al and Bob are endowed with chicken wings (C) and dill pickles (D)....
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Suppose that there Al and Bob are endowed with chicken wings (C) and dill pickles (D). Al's endowment of chicken wings and dill pickles (CA, DA) is (1, 2). For Bob, he is endowed with (DB, DB) = (3,4). Suppose that Al and Bob's utility functions (UA and UB) are given by UA (CA, DA) = min (CA, DA) and UB (CB, DB) = min (CB, DB). a) Draw endowment allocation "e" on an appropriate, well-labeled Edgeworth box. b) Draw Al's and Bob's indifference curves going through "e". Find the equations and the slopes at point e. Graph them. c) On your graph, indicate all allocations that pareto dominates e. d) On your graph, indicate all allocations that are pareto dominated by e. e) Characterize the contract curve and graph it. f) Al and Bob can agree to "trade" to improve their welfare from point e. Where do you expect them to finally end up? Are there some allocations among the contract curve they will not end up? Why or why not? Suppose that there Al and Bob are endowed with chicken wings (C) and dill pickles (D). Al's endowment of chicken wings and dill pickles (CA, DA) is (1, 2). For Bob, he is endowed with (DB, DB) = (3,4). Suppose that Al and Bob's utility functions (UA and UB) are given by UA (CA, DA) = min (CA, DA) and UB (CB, DB) = min (CB, DB). a) Draw endowment allocation "e" on an appropriate, well-labeled Edgeworth box. b) Draw Al's and Bob's indifference curves going through "e". Find the equations and the slopes at point e. Graph them. c) On your graph, indicate all allocations that pareto dominates e. d) On your graph, indicate all allocations that are pareto dominated by e. e) Characterize the contract curve and graph it. f) Al and Bob can agree to "trade" to improve their welfare from point e. Where do you expect them to finally end up? Are there some allocations among the contract curve they will not end up? Why or why not?
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Related Book For
Microeconomics An Intuitive Approach with Calculus
ISBN: 978-0538453257
1st edition
Authors: Thomas Nechyba
Posted Date:
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