Bundle: Microeconomic Theory: Basic Principles and Extensions, 12th + MindTap Economics, 1 term (6 months) Printed Access Card
12th Edition
ISBN: 9781337198202
Author: NICHOLSON, Walter, Snyder, Christopher M.
Publisher: Cengage Learning
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Chapter 2, Problem 2.7P
(a)
To determine
To show: If
(b)
To determine
To show:Solving problem for
(c)
To determine
To find:The optimal solution when
(d)
To determine
To find:The solution for the problem when
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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 allocations
Bluth’s preferences for paper and houses can be expressed as Ub(p, h) = 2pb + hb, while Scott’s preferences can be expressed as Us(p, h) = ps + 2bs. Bluth begins with no paper and 10 houses, whereas Scott begins with 10 units of paper and no houses.
1. Is the starting endowment Pareto efficient? Justify your answer using an Edgeworth box?
Determine whether each of the following price pairs is consistent with a competitive equilibrium. If yes, determine the resulting allocation of goods, sketching that equi- librium in your Edgeworth box. If not, explain why not (for what good is there a shortage, for what good is there a surplus?)
pp =$3 and ph =$1 along with pp =$1 and ph =$1
Assume that the price of houses is $1. Given that price, determine the highest price pp that is consistent with a competitive equilibrium.
You have k20 per week to spend and two possible uses for the money: telephoning friends back home and drinking coffee. Each Hour of phoning costs k2 and each cup of coffee costs k1. Your utility function is U(X,Y)=XY,where X is the hours of phoning you do and Y the number of cups of coffee you drink. What are your optimal choices? What is the resulting utility levels? You can use the standard result on the constrained maximization of such a function, but must state in clearly
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Bundle: Microeconomic Theory: Basic Principles and Extensions, 12th + MindTap Economics, 1 term (6 months) Printed Access Card
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