Note: There are may be other questions related to this one. It is strongly recommended that write down your answer to this question in case you need to use it later. Consider an one person, two good, one input economy. This is "Lea's Economy". Lea's utility function is U= x/b yl-1/b where b=4, x denotes her consumption of good X, and y denotes her consumption of good Y. The production function of good X is given by X = 15 Lx and the production of Y is given by Y = 2 Ly2, where Lx and Ly denote respectively the amount of labour used in the production of good X and in the production of good Y. The total amount of labour in the economy is 806. Is the general equilibrium in this economy efficient? Answer the question as follows: • If it is efficient, then derive and enter below the equilibrium price of good X, assuming that the equilibrium price of labour is equal to 1. • If it is not efficient, then derive and enter below the average cost of the sector which gets in the way of efficiency at 100 units of output, assuming that the equilibrium price of labour is equal to 1.

Note: There are may be other questions related to this one. It is strongly recommended that write down your answer to this question in case you need to use it later. Consider an one person, two good, one input economy. This is "Lea's Economy". Lea's utility function is U= x/b yl-1/b where b=4, x denotes her consumption of good X, and y denotes her consumption of good Y. The production function of good X is given by X = 15 Lx and the production of Y is given by Y = 2 Ly2, where Lx and Ly denote respectively the amount of labour used in the production of good X and in the production of good Y. The total amount of labour in the economy is 806. Is the general equilibrium in this economy efficient? Answer the question as follows: • If it is efficient, then derive and enter below the equilibrium price of good X, assuming that the equilibrium price of labour is equal to 1. • If it is not efficient, then derive and enter below the average cost of the sector which gets in the way of efficiency at 100 units of output, assuming that the equilibrium price of labour is equal to 1.

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter3: Preferences And Utility

Section: Chapter Questions

Problem 3.9P

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