Assume the situation of an exchange economy. (a) Determine the contract curve as an expression in which good I (x₁) is a function of good 2 (x2). (b) Provide a diagram that illustrates the contract curve and the core of the economy. (c) Determine the Walrasian equilibrium prices.
Q: Indicate True (T) or False (F) for the following questions, and explain your answer in 50 words…
A: Absolute Advantage: The absolute advantage arises when the country produces more with the given…
Q: In the H-O model, a country that exports one product and imports a different product is called…
A: Intra Industry Trade (IIT) denotes the trading between two countries of similar products belonging…
Q: Assume two countries and their Production Possibilities Frontiers (PPFs) represented by In similar…
A: A curve that represents the variations in the quantity of two products in case both depend upon the…
Q: Which of the assumptions of comparative advantage seem unrealistic? Fixed technology and imperfect…
A: Trade is defined as the exchange of commodities and services across the boundary of the country.
Q: International trade Consider an H-0 economy in which there are two countries (US and France), two…
A: Consider the US as a Home country and France as a Foreign country.
Q: There are differences and similarities among the different trade models. Here are some of them: -The…
A: Since you have posted a question with multiple sub-parts, we will solve the first three subparts for…
Q: TRUE OR FALSE One implication of Walras’ Law for a two-commodity exchange economy is that if one…
A: Walras law says that if the demand and supply is satisfied for one good in any economy with two…
Q: Austria can produce 1 unit of food using 12 hours of labour time and 1 unit of machinery using 4…
A: Production possibility frontier is a graphical representation of different combinations of outputs…
Q: QUESTION 1. Consider a standard Heckscher-Ohlin model with two countries: Germany is…
A: When the available resources are out of balance, the Heckscher-Ohlin theorem explains quantitatively…
Q: The law of comparative advantages in trade typically applies only to trade between nations and…
A: The law of comparative advantage states that in a situation of free trade, an individual or a…
Q: If a scale economy is the dominant technological factor defining or establishing comparative…
A: The answer is as follows:-
Q: Complete the following table by determining the opportunity cost of a car and of a ton of grain for…
A:
Q: “The gravity model of international trade is able to predict trade flows between two countries based…
A: (1)“The gravity model of international trade is able to predict trade flows between two countries…
Q: The U.S produces two goods. Micro Lectures (M) and Ice Cream (I) It does so using the function 8M^2…
A: US produces on the PPF 8M2+2I2=500 The citizens utility is given by, U(M.I)=10M0.5I0.5 World prices…
Q: Suppose an economist develops an international trade model based on the assumption that there are…
A: The exchange of goods and services between two or more nations in the world is referred to as…
Q: Consider the two countries of Syria and UAE. A business man wants to do trade between the two…
A: Since you have posted a question with multiple sub parts, we will solve first three subparts for…
Q: There are differences and similarities among the different trade models. Here are some of them: -The…
A: Answer to the 1st blank is "only one factor of production" (as goods produced in this model are…
Q: Which trade theory contends that a country that initially develops and exports a new product may…
A: There are various theory on international trade and each have its own importance . In this example…
Q: Assume that the global economy consists of only two countries called F and G. It is said that there…
A: Given: Case 1: (1) Country F: X 10 units or Y 20 units. (2) Country G: X 10 units or Y 10 units.…
Q: Starting from an autarky (no-trade) situation with Heckscher-Ohlin model, if Country H is relatively…
A: As per Heckscher-Ohlin model, a country to produce and export that goods which have intensive use of…
Q: There are two countries: Country A and Country B. These countries have the same amount of resources…
A: Comparative advantage refers to the ability to produce goods and services at a lower opportunity…
Q: Suppose that country A using one unit of labor can produce 80 pounds of apples or 20 pounds of…
A:
Q: It has been shown that the US has comparative advantage in capital-intensive goods while China has…
A: The ability of an economy for producing a specified good or service at a lower cost of opportunity…
Q: What does Heckscher-Ohlin (H-O) model postulates? Which force does H-O identify as the fundamental…
A: The Heckscher-Ohlin theory is used to determine how an economy is going to be involved in…
Q: Assume Indonesia and China are trading partners. Indonesia initially exports palm oil to and imports…
A:
Q: discuss the economic implications for all relevant economic agents of a country joining a common…
A: A common market is a contractual term in which a coalition of countries with common external tariffs…
Q: Suppose we consider the outcome in an exchange economy to be unfair, consumers of type A get a lot…
A: The study of how the distribution of wealth and goods influences social welfare is known as welfare…
Q: Consider a 2x2x2 Heckscher-Ohlin model with two countries, Australia and Japan. Australia produces…
A: The Stolper-Samuelson Theorem predicts that in India, as trade barriers continue to decline, the…
Q: Suppose the Heckscher-Ohlin model was modified to allow for technology differences to exist between…
A: The Heckscher-Ohlin model is an economic theory that proposes that countries export what they can…
Q: Let us consider the following version of the Heckscher-Ohlin model with two countries H and F, two…
A: Given Information: The relative price of good x increases. Production of good X is skilled labour…
Q: Nancy and Bill are auto mechanics. Nancy takes 8 hours to replace a clutch and 6 hours to replace a…
A:
Q: Consider the market for meekers in the imaginary economy of Meekertown. In the absence of…
A: Domestic Price = $23 World Price = $25 The domestic price is less than the world price. Hence, under…
Q: The gravity model of trade describes an exact physical relationship between trade, distance and size…
A: "The statement is FALSE."
Q: If it is more efficient for a country to produce a mixture of all goods (a combination that contains…
A: Production possibility curve (PPC): This curve helps to produce the two goods in the most efficient…
Q: Use the following information to answer question: Assume the standard trade model with two countries…
A: The involvement in more open international trade increases the total surplus of the nation(the sum…
Q: Movement of Labor and Capital Between Countries In this question, we use the Rybezynski theorem to…
A: A production–possibility frontier (PPF), production possibility curve (PPC), production possibility…
Q: Suppose the relative price of good A before trade is equal to one in the home country and two in the…
A: According to the question, the three is two countries home and foreign both have a different…
Q: Discuss the opportunity cost you incur for some activity in your life. Additionally, what activity…
A: Opportunity cost(OC) refers to the value of something when a specification is chosen. It is the cost…
Q: International trade Consider an H-0 economy in which there are two countries (US and France), two…
A: The Hecksher-Ohlin (HO) model proposes that when engaging in trade, nations with capital abundance…
Q: In a hunter-gatherer society lives 2 people, Adam and Smith. Adam picks 10 bananas a week. Smith…
A: Given:- Bananas pick by Adam=10 Bananas Wildberries gathered by Smith=50 wildberries Both Adam and…
Q: 'If a country has an absolute advantage in the production of all goods then it cannot gain from…
A: Absolute advantage: It refers to the ability of a company, or an economy under which they are able…
Q: Characterize a competitive equilibrium for an exchange economy. Provide conditions under which an…
A: Indifference curves represent combinations of two goods such that the consumer derives the same…
Q: Explain, with a two-country, two-good model, why the Heckscher-Ohlin model predicts only partial…
A: Trade between 3 or additional countries and product is noted as partial specialization attributable…
Q: Explain trade gains graphically and also split trade gains into exchange gains and specialization…
A: Gains from trade are graphically represented by the Production Possibilities Frontier (PPF) curve.…
Q: _________has absolute advantage in the production of paper. ________ has comparative advantage in…
A: In 12 labour hours Nigeria can produce either 3 boxes of paper or 24 pens. At the same 12 labour…
Assume the situation of an exchange economy.
(a) Determine the contract curve as an expression in which good I (x₁) is a function of good 2 (x2).
(b) Provide a diagram that illustrates the contract curve and the core of the economy.
(c) Determine the Walrasian
Step by step
Solved in 8 steps with 8 images
- A consumer is willing to trade 4 units of x for 1 unit of y when she is consuming bundle(8, 1). She is also willing to trade in 1 unit of x for 2 units of y when she is consumingbundle (4, 4). She is indifferent between these two bundles. Assuming that the utilityfunction is Cobb-Douglas of the form U(x,y)=xα yβ, where α and β are positiveconstants, what is the utility function for this consumer?Consider a hypothetical consumer named Hayden who is shopping for bread and brie. The graph with bread and brie on the axes presents the utility‑maximizing combinations of bread and brie that Hayden chooses when the price of bread is $1.00$1.00 per loaf and the price of brie is $4.00$4.00 and $6.00$6.00 per wheel, respectively. The other graph shows Hayden's demand curve for brie. The two points and associated values in the graph for bread and brie combinations correspond to points A and B in the graph of the demand curve for brie. What are the specific prices and quantities of brie associated with points A and B on Hayden's demand curve? price of brie at point A: $$ quantity demanded at point A: price of brie at point B: $$ quantity demanded at point B:Consider two individuals whose utility functions are given by
- Suppose that consumer I has the utility function u(x,y) = x + 2y and consumer II has the utility function u(x,y) = min{x, 2y}. Consumer I initially has 12 units of y and zero units of x, while consumer II has 12 units of x and zero units of y. It is correct to state that, in competitive equilibrium, the agents' consumption basket will be:Heather and Jeremiah both enjoy sunflower butter (s) and jelly (j) sandwiches, but they have varying preferences regarding the optimal ratio of the two. Heather prefers her sandwiches to have 6 spoonfuls of sunflower butter for every 3 scoops of jelly, whereas Jeremiah prefers 3 scoops of sunflower butter for every 5 scoops of jelly. They both would prefer as many sandwiches as possible, but derive no utility from sandwiches without their preferred ratio of s and j. A) Write down a utility function for both Heather and Jeremiah regarding consumption of s and j (U(s,j)) B) On the same graph, draw a set of indifference curves for both Heather and Jeremiah, labeling which is which. C) In addition to s and j, Heather and Jeremiah now need bread, b, to make sandwiches. Heather prefers to separate her sunflower butter and jelly and therefore uses 3 slices of bread per sandwich. Write down Heather’s utility function Uh(s,j,b) as a function of the three inputs.First household m=$2,500 per month, spends $125 dollars per month on electricity. Second household m=$10,000 per month and spends $200 per month on electricity. p1=0.1 and p2=1 x1=consumption of electricity and x2=everything else The preferences over electricity and other goods is described by a Cobb- Douglas utility function. What are the parameters of the utility function for each of the two households?
- Describe the two approaches of utility analysis !I am unsure the direction the utility functions would go in , with this specific scenarioCeja has utility function U=A2*B2 , where A equals the number of apples she eats each week, while B is the number of bananas she eats each week. Ceja has $20 to spend on fruit each week. The price of an apple is $1, while the price of a banana is $0.25. Find out the combination of Apples and Bananas that maximize Ceja’s satisfaction. If price of Banana is increased by $.25, what will be the new combination of A and B that would maximize her utility? Show graphically and drive the demand curve for Bananas
- Consider an economy composed of 16 consumers. Of these, 5 consumers each own one right shoe and 11 consumers each own one left shoe. Shoes are indivisible. Everyone has the same utility function, which is Min(2R, L}, where R and L are, respectively, the quantities of right and left shoes con sumed. A) (10%) Is the status quo (where each individual has his own shoe) Pareto efficient? If so, briefly explain why. If not, provide a Pareto improvement b) (10%) Characterize all Pareto efficient allocationsConsider a couple whose behaviour follows the unitary household model. Their preferences can be represented by the utility function: U(CM; CH) = min (CM, CH), where CM, denotes market goods and CH denotes home production. Each spouse can work up to 50 hours per week, and those 50 hours can be divided between market work and home production. Joe and Anna are each paid £20 per hour for market work. Joe produces £20 of home production per hour, while Anna produces £30 per hour of home production. (a)How many hours are each of the spouses allocating to home production and market work? and Suppose that Anna is offered a pay raise, so that her hourly market wage increases to £25, and nothing else changes. Will that change the identity of the spouse who works more hours on the market? Explain your answer.Two students go out to lunch and decide to split the bill evenly between them. Each student has a quasi-linear utility function given by ui(fi , xi) = φi(fi) + xi , where φi(·) is strictly concave, fi is the amount of food consumed by student i, and xi is a composite numeraire good. Each student has a fixed budget of mi . EVALUATE THIS CLAIM: Both students eat too much!