Microeconomics (9th Edition) (Pearson Series in Economics)
9th Edition
ISBN: 9780134184241
Author: Robert Pindyck, Daniel Rubinfeld
Publisher: PEARSON
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Chapter 16, Problem 4RQ
To determine
The agreement to a given statement.
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Chapter 16 Solutions
Microeconomics (9th Edition) (Pearson Series in Economics)
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- Suppose the Economics Department has a graduation party for its students but as a final test they must show they have learned something about trade. Students in group A are given food (F) when they walk in, and students in group B are given a drink (D). Refer to Scenario 1. Suppose that all members of both groups have identical preferences where food and drink provide utility U = FαDβ. The contract curve in the Edgeworth box using a student from each group would be (a) a right angle connecting the lower left corner with the upper right corner.(b) a curve (not necessarily a line) connecting the lower left corner with the upper right corner. (c) a line connecting the lower left corner with the upper right corner.(d) a right angle connecting the upper left corner with the lower right corner.arrow_forwardSuppose the Economics Department has a graduation party for its students but as a final test they must show they have learned something about trade. Students in group A are given food (F) when they walk in, and students in group B are given a drink (D). Refer to Scenario 1. Suppose they have very different preferences where food and drink provide utility. For group A, U = FαDβ. For group B, U = min{F,D}. The contract curve in the Edgeworth box using a representative from each group would be (a) a right angle connecting the lower left corner with the upper right corner.(b) a curve (not necessarily a line) connecting the lower left corner with the upper right corner. (c) a line connecting the lower left corner with the upper right corner.(d) a right angle connecting the upper left corner with the lower right corner.arrow_forwardWhat is the concepts of edgeworth box diagram, advantage zone, and contract curve.arrow_forward
- Why is the production possibility frontier concave? Be sure to explain economic intuition behind that fact.arrow_forwardDear tutor, please solve these True/False Questions. Thank You! 1. Any point on the contract curve is Pareto efficient regardless of the initial endowment. 2. When two people trade their initial endowments to a point on the contract curve, only the level of the endowments will determine the new allocation.arrow_forwardDear tutor, please solve these True/False Questions. Thank You! Can it be efficient for one trader to consume all units of the goods while the other trader consumes nothing? In other words, does this point lie on the contract curve? A competitive equilibrium is not Pareto efficient if some members of society are unable to afford a necessary good.arrow_forward
- 22) Consider a society consisting of just a farmer and a tailor. The farmer has 10 units of food but no clothing. The tailor has 20 units of clothing but no food. Suppose each has the utility function U = F * C. Derive the contract curve. 23) Robinson starts out with 10 lobsters and 5 coconuts. Friday starts out with 10 lobsters and 15 coconuts. After trading, Robinson ends up with 8 lobsters and 10 coconuts. Robinson feels neither better nor worse off than when he started but cannot get Friday to agree to any more trades. Friday feels better off than when he started. Draw the Edgeworth box consistent with this story.arrow_forwardAlec and Ellie are the only detectives in the town of Broadchurch. Assume efficient production. Each has 10 hours in a day to allocate between conducting interviews and completing paperwork. They work independently and do not trade any jobs. Right now they each spend half their time completing paperwork and half their time conducting interviews. In one hour Alec can produce 4 interviews or 9 files of paperwork. In one hour, Ellie can produce 5 interviews or 1 files of paperwork. A trade is proposed between Alec and Ellie at the following price: 1 interview for 18 files of paperwork. If they trade at this price, they will fully specialize. At this price, what is the total number of interviews conducted in Broadchurch? Enter a number only.arrow_forwardConsider a simple economy with two individuals (A and B) and two goods (x and y). Can you draw the Edgeworth Box Diagram and explain the contract curve?arrow_forward
- Explain briefly why the people and firms operating within a command economy would in all cases be less free than the people and firms operating within a capitalist economy.arrow_forwardConsider an exchange economy with 2 agents and 2 goods. In an Edgeworth-Bowley diagram, show and illustrate that if both agents have the same preferences, the contract curve is a straight line from the bottom left-hand corner to the top right-hand corner. Does it follow that if the agents do not have the same preferences, the contract curve is not a straight line? Suppose the two agents have the same endowments and the same preferences. Is mutually beneficial trade possible? Illustrate in an Edgeworth Bowley diagram. State and explain Walras Law. What are the implications of Walras’s Law? Illustrate Walras Law in an Edgeworth-Bowley diagram.arrow_forwardExplain the main assumption behind a concave production possibilities frontier.arrow_forward
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