/2. (a) Show that if x is an allocation in the y-core of an economy, then any two agents of the same type must receive the same bundles, provided the preferences of the agents are convex, strongly monotonic and continuous. (b) Suppose that an apple orchard is located next to a bee keeper. The orchard produces A apples and the bee keeper produces H units of honey. The cost function of the apple orchard is C(A) = A² and the cost function of the bee keeper is C,(H) = H² – A. Show that the socially efficient supply decisions involve apple orchard producing more apples than it would if it only considered its own costs. %3D
/2. (a) Show that if x is an allocation in the y-core of an economy, then any two agents of the same type must receive the same bundles, provided the preferences of the agents are convex, strongly monotonic and continuous. (b) Suppose that an apple orchard is located next to a bee keeper. The orchard produces A apples and the bee keeper produces H units of honey. The cost function of the apple orchard is C(A) = A² and the cost function of the bee keeper is C,(H) = H² – A. Show that the socially efficient supply decisions involve apple orchard producing more apples than it would if it only considered its own costs. %3D
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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