Question: This will be a depressing question. The world has two goods:masks (M) and sanitizer (S). Danny is born with an endowment (M=10, S=10) and has

This will be a depressing question. The world has two goods:masks (M) and sanitizer (S).

Danny is born with an endowment (M=10, S=10) and has a fixed marginal utility of 1 for masks ( ) and 0.5 for sanitizer () . His total utility is given by

Steve is born with (M=10, S=10) and has a marginal utility of for masks andfor sanitizer. His utility is given by .

The total endowment must satisfy , Md+Ms=20, Ss+Sd=20

(a)Is the endowment point on the utility possibilities frontier?

(b)Consider the allocation X= (Ms=3.5, Ss=7). Is this on the utility possibilities frontier? Will voluntary trade between Steve and Danny ever arrive at this point?

(c) Consider the allocation Y= (Ms=7.25, Ss=14.5). Is this on the utility possibilities frontier? Will voluntary trade between Steve and Danny ever arrive at this point?

(d)Would a utilitarian social welfare function prefer X or Y? Would a Rawlsian social welfare function prefer X or Y?

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock blur-text-image

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related Economics Questions!

Please help me with this question 1. This will be a depressing question. The world has two goods: masks (M) and sanitizer (S). Danny is born with an endowment (M=10, S=10) and has a fixed marginal...

1. This will be a depressing question. The world has two goods: masks (M) and sanitizer (S). Danny is born with an endowment (M=10, S=10) and has a fixed marginal utility of 1 for masks ( MUM = 1)...

Question 2 (in which Danny relates to today's youth). The world has two goods: boogie bombs (B) and chug jugs (C). Ninja is born with an endowment (B=100, C=20) and has a fixed marginal utility of 1...

ur email will be recorded when you submit this form If inflation were caused by a sudden increase in aggregate demand, then: 1 point real GDP would always increase. it would be costless because it...

Font 3 2 Paragraph 1 2 3 4 5 Which of the following is not an internal component of a PLC ? A ) CPU B ) PC ( personal computer ) C ) Input / output modules ( ports ) D ) Memory Which symbol below is...

Please just answer No. 3 QUESTION and provide me the brief summary to this case study. (Provide evidence based on the case study). I will give you a like after! Thank you. An Institution-Based View...

Please help me answer question #3 ONLY. AND - Identify the key issues to the case study above - Provide brief summary I will give a like after. Thank you! An Institution-Based View of IPR Protection...

Plea se I need the answer now 11. Ceteris paribus, an increase in the current account deficit will place pressure on the home currency: (a) upward (b) downward (c) no (d) upward or downward...

Question #3 ABC Corp. is an all-equity firm, and has 25,000 outstanding shares. The current earnings per share is $1.5. The expected value of the firm one year from now is $1,725,000. The firm...

ABC Corp. is an all-equity firm, and has 25,000 outstanding shares. The current earnings per share is $1.5. The expected value of the firm one year from now is $1,725,000. The firm currently has a...

Local Drilling Inc. is a Canadian drilling-site company. All of the company's drilling material is purchased by the head office and stored at a local warehouse before being shipped to the drilling...

You want to buy a house that will need to be financed. Look at different options and decide which will be the best choice for your situation. Determine financing options, and understand contracts...

You may complete your answer in exsel, word, or it may be handwritten = make sure you include all your work and as much detell as possible as to how you derlved your answer. Submit your answer in...

True or False explain 1.Firms that do not pay dividends cannot be valued using the dividend discount model but can be valued using the residual income model. 2.A companys cost of debt is the...

5. Use the distinction between the characteristics of private and public goods to determine whether the following should be produced through the market system or provided by government: (a) French...

7. The LoJack car recovery system allows the police to track stolen cars. As a result, they not only recover 90 percent of LoJack-equipped cars that are stolen but also arrest many auto thieves and...

4. What divergences arise between equilibrium output and efficient output when (a) negative externalities and (b) positive externalities are present? How might government correct these divergences?...