See page 605 02 Question (9 points) Ingrid and Norton are stranded on an island. They...

 

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See page 605 02 Question (9 points) Ingrid and Norton are stranded on an island. They consume and exchange bananas and coconuts. When Ingrid consumes C₁ coconuts and Br bananas, her utility is given by u (B₁, C₁)= B₁ +2√/C₁. When Norton consumes Cy coconuts and By bananas, his utility is given by UN (BN, CN) BN +4√CN. = Ingrid's initial endowment is 12 coconuts and 8 bananas. Norton's initial endowment is 4 coconuts and 8 bananas. For the following problems, place bananas on the horizontal axis and coconuts on the vertical axis. 1st attempt Part 1 (2.3 points) If Ingrid consumes C, coconuts and B, bananas, her marginal rate of substitution will equal the square root of If Norton consumes CN coconuts and BN bananas, his marginal rate of substitution will be log, cos. ō. MRS= See Hint Part 2 (3.4 points) On the contract curve, Ingrid's marginal rate of substitution equals Norton's. An equation that states this condition is written below. Match each letter to the corresponding term in the equation. √A-VB Items (3 items) (Drag and drop into the appropriate area below) 2 Categories CI A Drag and drop here CN B Drag and drop here C Drag and drop here See Hint From this equation, we see that = This result gives us one equation in the two unknowns: CI and CN. But we also know that along the contract curve it must be that CI + CN Part 3 (3.4 points) Solving these two equations in two unknowns, we find that everywhere on the contract curve, C and CN are constant and equal to and , respectively. (Round your answers to the nearest decimal if necessary.) Let bananas be the numeraire. The competitive equilibrium price of coconuts is x | x | = +. log. cos. ỗ. P See Hint (The answer should be a simplified fraction.) See page 605 02 Question (9 points) Ingrid and Norton are stranded on an island. They consume and exchange bananas and coconuts. When Ingrid consumes C₁ coconuts and Br bananas, her utility is given by u (B₁, C₁)= B₁ +2√/C₁. When Norton consumes Cy coconuts and By bananas, his utility is given by UN (BN, CN) BN +4√CN. = Ingrid's initial endowment is 12 coconuts and 8 bananas. Norton's initial endowment is 4 coconuts and 8 bananas. For the following problems, place bananas on the horizontal axis and coconuts on the vertical axis. 1st attempt Part 1 (2.3 points) If Ingrid consumes C, coconuts and B, bananas, her marginal rate of substitution will equal the square root of If Norton consumes CN coconuts and BN bananas, his marginal rate of substitution will be log, cos. ō. MRS= See Hint Part 2 (3.4 points) On the contract curve, Ingrid's marginal rate of substitution equals Norton's. An equation that states this condition is written below. Match each letter to the corresponding term in the equation. √A-VB Items (3 items) (Drag and drop into the appropriate area below) 2 Categories CI A Drag and drop here CN B Drag and drop here C Drag and drop here See Hint From this equation, we see that = This result gives us one equation in the two unknowns: CI and CN. But we also know that along the contract curve it must be that CI + CN Part 3 (3.4 points) Solving these two equations in two unknowns, we find that everywhere on the contract curve, C and CN are constant and equal to and , respectively. (Round your answers to the nearest decimal if necessary.) Let bananas be the numeraire. The competitive equilibrium price of coconuts is x | x | = +. log. cos. ỗ. P See Hint (The answer should be a simplified fraction.)

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B 2Jc MASB D UN B 4... View the full answer