The production possibility frontier (PPF) in the Grossman model is as below. Individuals would never choose __ as an optimal allocation of Z and H. B D A E Hmin N.
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- Are allocations methods more or less efficient than other methods?Q. It is possible to have a Pareto efficient allocation where everyone is worse off than they are at an allocation that is not Pareto efficient?Consider an economy inhabited by George and Harriet, whose utility functions are Ug : (ac)² (bc)2 Он тан + 2bн The total quantities of ale and bread that can be produced by the economy are a and b, and they are constrained by the production function b = 2(10 – a)/2 There are infinitely many Pareto optimal allocations. In one of them, Harriet's utility is 8. a) An allocation in this economy is described by a list of four variables. What are these variables? b) What four equations describe the Pareto optimal allocation in which Harriet's utility is 8? c) Find this Pareto optimal allocation.
- Consider a Robinson Crusoe Economy. There are two commodities in the economy: one is labor L and the other is yam y. The producer Crusoe has production technology of y = Lî. The consumer Crusoe's preference is represented by y(1 – L)¿ where L is the supply of labor. The consumer Cruose has all the share of the producer Crusoe's profit. (a) Find efficient allocation (L, y). (b) Define and calculate a competitive equilibrium of the economy. (Normalize the wage to be unity, i.e., w = 1).Graph a situation where an optimal allocation is unattainable so a society settles with an equal allocation of resources despite being inefficient. How can this be improved?Show an allocation that does not satisfy distributive efficiency and find an allocation that is Pareto superior to it.
- Based on the figure below, which of the following is correct? Bushels of grain 0 0 12- C 16 Angela's hours of free time MRS - MRT 24 Angela's indifference curves Angela's feasible frontier O The MRS is the trade-off between grain and free time that Angela is constrained to make. At a point to the left of Angela's optimal choice, the MRS is smaller than the MRT. At a point to the right of Angela's optimal choice, she is less willing to trade grain for free time than at her optimal choice. O Since all Angela's indifference curves have the same MRS at 16 hours of free time, any choice of grain at 16 hours of free time is optimal.An efficient allocation of resources occurs when?Li's marginal rate of substitution of hamburger for steak is 1/4, and Zhang's marginal rate of substitution of hamburger for steak is 2. The allocation of hamburger and steak Pareto-efficient between Li and Zhang because is not; if Li traded some amount of hamburgers to Zhang for some steak, it is possible that each can be better off is; Zhang's MRS is exactly 8 times larger than Li's MRS is; no trade can make both Li and Zhang better off is not; if Li traded some amount of steak to Zhang for some hamburgers, it is possible that each can be better off
- Analyze how pareto efficiency is achieved from consumption activities in an economyExplain the statement true or false. Give an example to explain your answer. "It is possible to have a Pareto efficient allocation where someone is worse off than she is at an allocation that is not Pareto efficient"Throughout this problem set, we will look at exchange economies with two goods and two agents. Let X = R², let u denote agent i's utility, and let wie X denote agent i's endowment. 1. Suppose u¹(x¹) = min{ri, 2} and wi = (4,8) for both agents i. (a) Argue that every Pareto optimal allocation has r≥r for both agents i. (b) Argue that every allocation z with r≥r for both agents i is Pareto optimal. (c) Draw an Edgeworth box, with a picture depicting every Pareto-optimal allocation. In this picture, also draw the endowment allocation, and draw each agent's indifference curve through the endowment. (d) Argue that, in any competitive equilibrium, the price of good 2 must be zero. (e) Find all competitive equilibria.