True or False. Please provide a completed and relevant explanation.

1. The only Pareto efficient allocation of an apple between Adam and Eve (assuming that both

like apples) is "half-half".

2. Consider Brian with utility given by u = 0:5 ln W. Brian owns a car of value W = $15; 000.

Driving a car is a risky activity and the probability of Brian being involved in a minor car

accident is 10%. In that case, the cost of repairs will be $2; 000. Brian is risk-averse and his

willingness to pay for full coverage insurance is $35.

3. In a linear demand, constant cost industry with two identical firms, there are two possibilities

for timing: Cournot where they produce simultaneously, and Stackelberg where one produces

before the other. The Stackelberg leader will necessarily earn a higher profit than it does

under Cournot competition.

4. Consider two firms producing an identical product with marginal costs MC1 = $0:98 and

MC2 = $1:00 correspondingly. The two firms set their prices simultaneously (Bertant competition) and the lowest price gets the entire market. If they set the same price they split the

market evenly. A set of equilibrium prices is p1 = $1:00 and p2 = $1:01.

5. The core in the Edgeworth box is the set of all allocations that are Pareto efficient.