Pearson eText Microeconomics -- Access Card
2nd Edition
ISBN: 9780136849513
Author: Acemoglu, Daron, Laibson, David, List, John
Publisher: PEARSON
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Question
Chapter 18, Problem 9P
(a)
To determine
Movie choice of Paul and Maya from an individual perspective.
(b)
To determine
Factors affecting Maya and Paul when on a date and Paul’s choice if Maya decides to watch a comedy.
(c)
To determine
Maya and Paul’s movie choice, why it is a herding tendency and how it would lead to cascading of information.
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Problem 1. Andy (consumer A) and Red (consumer B) growing old together on a remote
island on which only fish (good 1) and coconut (good 2) are available for consumption.
Both Andy and Red have Cobb-Douglas preferences. That is, consumer i has u(xi, z) =
(a)¹/2 (1)¹/2, where x is consumer i' s good j consumption with j = 1, 2. Also, Andy's ini-
tial endowment is w (w, w) (1,3) while Red's initial endowment is w = (wi, wz) =
=
=
=
(3, 1).
(a) Draw the Edgeworth box for this economy. Mark the point indicating the initial
endowment of each consumer.
(b) Draw the contract curve for this economy in an Edgeworth box (a graphical represen-
tation is sufficient). Explain if it is Pareto efficient for Andy and Red to consume their
endowments.
(c) What is the set of allocations that could be the outcome under barter in this economy?
(d) Let the price of fish be p₁ while the price of coconut be normalized to 1 without loss
of generality. For each consumer, solve the utility maximization problem,…
Ashley loves hanging out at the mall (payoff of 100) and hates hockey (payoff of -100). Joe loves hockey (payoff of 100) and hates hanging out at the mall (payoff of - 100). But both Ashley and Joe prefer to go out together (bonus payoff of 100 each in addition to the payoff from the activity they choose). If they go out separately, they get no bonus payoff. Complete the payoff matrix for Ashley and Joe. >>> If the answer is negative, include a minus sign. If the answer is positive, do not include a plus sign.
Use the scenario below to answer the question.
Chocolate raisin protein bars are Duc’s favorite dessert. A local bakery sells them for $1.00 each. Duc buys one and eats it at the bakery. Duc decides that he wants another one, but is not willing to pay full price. He knows the owner of the bakery and wants to negotiate. He offers to buy two more protein bars at $0.75 each. He plans to eat one at the store and anther one later. The bakery owner agrees to the deals.
What is the total utility of Duc’s decision?
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Chapter 18 Solutions
Pearson eText Microeconomics -- Access Card
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