Consider a trade economy with two people (A and B) and two goods (1 and 2). Person A's utility functionis U A = x1x2 where xi is A's consumption of good i E (1, 2). Person B's utility function is U B = y1 + y2,where yi is B's consumption of good i = (1, 2). There are 20 units of each good in the economy. Which ofthe following allocations are efficient?(a) x1 = 10, x2 = 10, y1 = 10, y2 = 10.(b) x1 = 7, x2 = 7, y1 = 13, y2 = 13.(c) x1 = 0, x2 = 0, y1 = 20, y2 = 20.(d) x1 = 15, x2 = 10, y1 = 5, y2 = 10.(e) x1 = 12, x2 = 12, y1 = 6, y2 = 6.

We consider Pareto criterion of efficiency which implies that an allocation is said to be efficient…

Consider a trade economy with two people (A and B) and two goods (1 and 2). Person A's utility function is U A = x1x2 where xi is A's consumption of good i € (1, 2). Person B's utility function is U B = y1 + y2, where yi is B's consumption of good i E (1, 2). There are 20 units of each good in the economy. Which of the following allocations are efficient? (a) x1 = 10, x2 = 10, y1 = 10, y2 = 10. (b) x1 = 7, x2 = 7, y1 = 13, y2 = 13. (c) x1 = 0, x2 = 0, y1= 20, y2 = 20. (d) x1 = 15, x2 = 10, y1 = 5, y2 = 10. (e) x1 = 12, x2 = 12, y1 = 6, y2 = 6.

Consider a trade economy with two people (A and B) and two goods (1 and 2). Person A's utility function is U A = x1x2 where xi is A's consumption of good i € (1, 2). Person B's utility function is U B = y1 + y2, where yi is B's consumption of good i E (1, 2). There are 20 units of each good in the economy. Which of the following allocations are efficient? (a) x1 = 10, x2 = 10, y1 = 10, y2 = 10. (b) x1 = 7, x2 = 7, y1 = 13, y2 = 13. (c) x1 = 0, x2 = 0, y1= 20, y2 = 20. (d) x1 = 15, x2 = 10, y1 = 5, y2 = 10. (e) x1 = 12, x2 = 12, y1 = 6, y2 = 6.

Economics:

10th Edition

ISBN:9781285859460

Author:BOYES, William

Publisher:BOYES, William

Chapter3: The Market And Price System

Section: Chapter Questions

Problem 14E

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