Alice (A) and Bob (B) have an endowment of goods 1 and 2, with Alice's endowment being (wf, wg) = (1, 2) and Bob's endowment equals (wł, w}) = (1,3). Alice's utility is given by u4 (xf', xf) = 2 ln ¤f + In æg , while Bob's utility is uB(x?, x}) = ln ¤{ +2 ln ¤?. Suppose that the social planner considers it to be imperative that agent B consumes exactly one unit of good 1 and four units of good 2. Although the social planner can not force the individuals to a particular consumption, they can enforce transfers of good 1 between the consumers (transfers of good 2 are not enforceable by the social planner). What transfer of good 1 would guarantee that in the resulting competitive Walrasian equilibrium consumer B consumes one unit of good 1 and four units of good 2? Select one: O a. One half unit of good 1 has to be transferred from agent A to agent B. O . There is no endowment for which agent B would consume x = 1 and x = 4 in the corresponding competitive equilibrium. Therefore, no such transfers exist. O c. One unit of good 1 has to be transferred from agent A to agent B. Od. Transferring good 1 is not sufficient. It is necessary to transfer one unit of good 2 from agent A to agent B.

Alice (A) and Bob (B) have an endowment of goods 1 and 2, with Alice's endowment being (wf, wg) = (1, 2) and Bob's endowment equals (wł, w}) = (1,3). Alice's utility is given by u4 (xf', xf) = 2 ln ¤f + In æg , while Bob's utility is uB(x?, x}) = ln ¤{ +2 ln ¤?. Suppose that the social planner considers it to be imperative that agent B consumes exactly one unit of good 1 and four units of good 2. Although the social planner can not force the individuals to a particular consumption, they can enforce transfers of good 1 between the consumers (transfers of good 2 are not enforceable by the social planner). What transfer of good 1 would guarantee that in the resulting competitive Walrasian equilibrium consumer B consumes one unit of good 1 and four units of good 2? Select one: O a. One half unit of good 1 has to be transferred from agent A to agent B. O . There is no endowment for which agent B would consume x = 1 and x = 4 in the corresponding competitive equilibrium. Therefore, no such transfers exist. O c. One unit of good 1 has to be transferred from agent A to agent B. Od. Transferring good 1 is not sufficient. It is necessary to transfer one unit of good 2 from agent A to agent B.

Linear Algebra: A Modern Introduction

4th Edition

ISBN:9781285463247

Author:David Poole

Publisher:David Poole

Chapter2: Systems Of Linear Equations

Section2.4: Applications

Problem 27EQ

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