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11 11. Consider the following economy: There are three goods, legume, tillip and quillip, two consumers (called 1 and 2), and two firms (called x and y). Firm x is owned entirely by consumer 1 and makes tillip out of legume according to the simple linear production technology t :::; 3l . That is, for every unit of legume input, this firm produces three times as many (or less) units of tillip. Firm y is owned entirely by consumer 2 and makes quillip out of legume according to the production technology
q = 4l. Each consumer initially owns 5 units of legume. Consumer 1 has utility function u1(t, q) = 6 + .4ln(t) + .6ln(q). Consumer 2 has utility
function ui(t, q) = 8 +ln(t) + ln(q).
(a) What is the general equilibrium of this economy? Assume that firms take prices as given and are profit maximizers, and consumers take prices
as given. When you give prices, normalize them so the price of legume is $1. What would be the general equilibrium if the shareholdings were reversed? If each consumer held a half-share in each furn?
(b) What is the set of all feasible, Pareto efficient allocations for this econ omy?
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- We R' Write currently purchases the wood used to make their pencils, the rubber used to make erasers for their pencils, and the lead for the pencils from other firms. However, We R' Write is considering purchasing these firms so they can personally produce all the components used for making pencils. As an economist, what would you call the current way We R' Write is acquiring the products needed to make their pencils (purchasing from other firms)? What benefits and problems could We R' Write have with the current way of doing business? As an economist, what would you call We R' Write's proposal to purchase the firms that make the pencil components? What benefits and problems could We R' Write have concerning the purchase of these other firms?Suppose two economies Home (H) and Foreign (F) produce two goods, bread and wine, with only one production factor: labour. Production technology, expressed as marginal product of labour (MPL), is given in the following table: Technologies expressed as MPL Bread Wine Home 1/6 1/12 Foreign 1/4 1/2 Suppose that Home has 2400 units of labour and Foreign has 1800 units of labour. a. ) Derive the Production Possibilities Frontier (PPF) and the Consumption Possibility Frontier (CPF) for Home and Foreign, with bread on the horizontal axis and wine on the vertical axis. What is the autarky equilibrium price of bred relative to wine in each country? b.) What country has the absolute advantage in producing each good? What country has the comparative advantage in producing each good? Briefly explain the difference between these two concepts. Suppose both countries are now free to trade. The world relative price of bread is 1. c. What is the pattern of specialisation and trade?…Consider an economy where all production and all consumption is carried out by a single agent, Robinson Crusoe. Robinson, as a consumer, is endowed with H hours of time. His utility depends in hours of leisure, h, and coconuts, y: u(h, y) = (h)1−βyβ with 0 ≤ h ≤ H,β ∈ (0,1). Robinson, as a firm, can transform hours of labor, z, into coconuts y. His technology of production is given by y = f(z) = zα with α ∈ (0, 1). Let p denote the price of coconuts, w denote the price of leisure/labor, and π denote the firm’s profits. Note that the budget constraint of Robinson is py ≤ w(H − h) + π. Note that the budget constraint of Robinson is px ≤ w(H − h) + π, and that in equilibrium in the market of coconuts x = y and in the labor market h + z = H. Find the equilibrium allocation and price vector in equilibrium.
- Suppose that ABC firm has 100 hours of labor a day used to produce snacks and swimming classes. The data below presents the maximum quantity of each good produced. Labor (hours) Swimming classes (classes per week) snacks 0 0 or 0 20 4 or 10 40 8 or 18 60 12 or 24 80 16 or 28 100 20 or 30 Explain if ABC firm can produce 8 classes and 28 snacks per week? Suppose that ABC firm produces 8 swimming classes and 18 snacks per week, explain if this production is efficient. Suppose ABC produces 16 classes and 10 snacks a week. Does it face a tradeoff? ExplainAssume that Cliff and Paul were both producing wheat and corn, and each was dividing their time equally between the two. Then they decide to specialize in the product they have a comparative advantage in and trade 3 bushels of wheat for 3 bushels of corn. What would Cliff now be able to consume? Question 10 options: 3 bushels of wheat and 3 bushels of corn 3 bushels of wheat and 4 bushels of corn 4 bushels of wheat and 3 bushels of corn 2 bushels of wheat and 3 bushels of cornIn the graph above, the resources in this economy are A. specialized at producing corn. B. specialized at producing robots. C. not specialized toward either corn nor robots (they're generic).
- 5 Supposing that a single consumer works for a firm, the quantity of labor input for the firm, N, is identical to the quantity of hours worked by the consumer, h - l. Graph the relationship between output produced, Y on the vertical axis and leisure hours of the consumer, l, on the horizontal axis, which is implied by the production function of the firm. (In Chapter 5, we refer to this relationship as the production possibilities frontier.) What is the slope of the curve you have graphed? PLEASE DO NOT COPY OTHER PEOPLE'S WORK AND GRAPHConsider a simple exchange economy with two people: Bob and Jake. Bob and Jake both have 10 hours of time available. They can use thier their time to do one of 2 things: make pancakes or make hamburgers. Bob can make 2 hamburgers in an hour or 1 pancake in an hour. Jake can make 3 pancakes in an hour and 2 hamburgers in an hour. Use this information to answer the following questions: a) Who has absolute advantage in the production of hamburgers? Who has absolute advantage in the production of pancakes? b) Who has comparative advantage in the production of hamburgers? Who has comparative advantage in the production of pancakes? c) Can Bob and Jake both benefit from trade if the terms of trade are one pancake per hamburger? Why or why not?Consider two neighboring island countries called Dolorium and Contente. They each have 4 million labor hours available per week that they can use to produce rye, jeans, or a combination of both. The following table shows the amount of rye or jeans that can be produced using 1 hour of labor. Country Rye Jeans (Bushels per hour of labor) (Pairs per hour of labor) Dolorium 5 20 Contente 8 16 Initially, suppose Contente uses 1 million hours of labor per week to produce rye and 3 million hours per week to produce jeans, while Dolorium uses 3 million hours of labor per week to produce rye and 1 million hours per week to produce jeans. Consequently, Dolorium produces 15 million bushels of rye and 20 million pairs of jeans, and Contente produces 8 million bushels of rye and 48 million pairs of jeans. Assume there are no other countries willing to trade goods, so, in the absence of trade between these two countries, each country consumes the amount of rye and jeans…
- Germany is the European Union’s largest economy. Suppose that it produces two goods: electricity and food. Electricity (e) is produced with large capital investments (C), especially in green energy, while food (f) is labour intensive (L). This means ae > af. You are given the following graph (graph attached as image to question) determined from the final prices of food and electricity and the optimal capital-labour ratios in the two sectors. From this graph below, explain which sectors production is the largest and why.In the above diagram above which of the following statement is TRUE? A) To move from production combination A to production combination B requires that we transfer resources from guns to butter. B) To move from production combination A to production combination B requires that we either increase the available resources or improve the available technology. C) To move from production combination A to production combination B requires that we expand gun production by reducing butter production. D) To move from production combination A to production combination B requires that we reduce the amount of resources that are either unemployed or underemployed. E) To move from production combination A to production combination B requires that we transfer resources from butter to guns.4 Use the following information to answer the questions below – Assume the following: (Alk/Akx)> (Aly/Aky) and (La/Ka)< (Lb/Kb) Where “a” gives you the amount of labor and capital going into the production of good X and good Y respectively based on technology in the two countries A and B. There is no taste bias. Based on your understanding of the relationships above good X is ___________(labor/capital) intensive and good Y is _________(labor/capital intensive). Next, Country A is ____________(capital/labor abundant and Country B is ____________ (capital/labor) abundant. Label the autarky consumption/ production points, draw the pre trade or domestic price ratio, and then draw the international price line and the label the free trade production/consumption points with the indifference curves, trade triangles, labeling the Exp and Imp! Write out the pre trade price ratio, the international price line, show the gains from trade and write out the pattern of trade! Do these…