Using the appropriate diagram(s), explain briefly why the third general equilibrium efficiency condition (i.e. MRSxy = MRPTxy, where x and y are any two products), that connects consumption and production, must hold.
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Using the appropriate diagram(s), explain briefly why the third general equilibrium efficiency condition (i.e. MRSxy = MRPTxy, where x and y are any two products), that connects consumption and production, must hold.
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- “Generally, an economy will tend to be relatively effective at producing goods that are intensive in the factors with which the country is relatively well endowed.” Explain the above statement with the help of a graph.a) Consumption of certain public goods by individuals or firms reduce the quality of services available to others. Is it possible to achieve an equilibrium in such markets? Explain the Pareto efficiency conditions of such goods.The imposition of a tax involves an “excess burden.” How would you show a similar result with a general equilibrium diagram (Note: With the general equilibrium diagram, you must be more precise about how tax revenue is used.)
- Explain carefully using a graph (that is drawn to scale) to describe a situation where it is an optimal strategy for members in a two-person household to engage in equal consumption of total household income.Which is the correct answer ? Coffee and doughnuts are complements in consumption. Suppose bad weather in the coffee producing regions of the world, which shifts the coffee supply curve leftward. How do the general equilibrium price and quantity outcomes compare to the partial equilibrium outcomes for this situation? A. General equilibrium price and quantity are higher. B. General equilibrium price is higher and quantity is lower. C. General equilibrium price is lower and quantity is higher. D. General equilibrium price and quantity are lower.Consider two substitute products; movies and Box Office rentals. With the aid of graphical illustrations, explain why the outcome of a general equilibrium analysis can differ substantially from that of a partial equilibrium analysis, when evaluating the impact of a unit tax on movie tickets.
- 7. Assume a two-good production economy characterized by the production functions: Q1 = K1 1/2L1 1/2 and Q2 = K2 + L2 With fixed total endowments of 100 for both K and L. Derive the production possibilities frontier for this economy and provide a graphConsider your preferences for Gasoline (X) and a composite good (Y). Your utility function is U(X,Y) = X^(2/5 )+ Y^(2/5). You have an annual income of $40,000. Suppose the price of the composite good is $1. a) Due to shortages, the government has introduced a rationing system such that you can only consume a maximum of 5,000 liters a year at $1 a liter. What would be your optimal consumption bundle? b) The government removes the rationing system and the free market price of gasoline jumps to $2. What would be your new optimal consumption bundle? Are you better off with or without the rationing? Show by finding the utility levels. c) Illustrate your solution in a clearly labeled graph.Use the Fundamental Theorem of Exchange and draw Edgeworth Box diagrams to show the conditions necessary for an 'efficient' allocation of two goods between two individuals. Use this model to evaluate the statement: "If two individuals have identical endowments of both goods there are no possible gains from trade". Hint: you need to develop your explanation of the theory and the efficiencyconditions step-by-step. You need to draw several diagrams showing Edgeworth Box
- The graph directly below depicts the production of oil from the Gulf of Mexico, with market demand, MEC, MSC, and MPC all drawn on the figure. The X axis defines barrels of oil pumped from the gulf. What is the wedge in terms of barrels of oil? 1. 9 2. 4 3. 5 4. There is no wedge hereConsider a two-city (A and B) regional economy where each city operates on the negatively sloped portion of its utility curve. In the initial equilibrium, the two cities are identical. Then air pollution (lead emissions) in city B decreases the brain power and productivity of workers in the city by 20 percent. Illustrate the effects of lead emissions on the regional equilibrium, indicating the direction of changes in city size (the number of workers) and regional utility.I need help with this homework problem. Suppose there are two consumers, A and B. The utility functions of each consumer are given by: UA(X,Y) = (X^1/2)*(Y^1/2) UB(X,Y) = X + Y The initial endowments are: A: X = 8; Y = 3 B: X = 4; Y = 5 What is the marginal rate of substitution for consumer A at the initial allocation? What is the marginal rate of substitution for consumer B at the initial allocation? Is the initial allocation Pareto Efficient?