An economy consists of two individuals, Lynne and Jonathan, whose utility levels are given by U₁ and U₁, respectively. a. Suppose that the social welfare function is W = U₁ + U₁ True or false: Society is indifferent between giv- ing a dollar to Lynne and a dollar to Jonathan. b. Now suppose that, instead, the social welfare function is W = U₁ + 8U, True or false: Society values Jonathan's hap- piness more than Lynne's. c. Now suppose that, instead, the social welfare function is W = min[U₂, U₁] True or false: In this society, the optimal dis- tribution of income is complete equality.

1.  a) Consider an economy with 3 agents, Mohammed (M), David (D) and Susan (S). There are two goods available, good x, and good y. The marginal rates of substitution (where good x is on the horizontal axis and good y is on the vertical axis) are given by for Mohammed,  for David and  for  Mohammed and David are both consuming twice as much of the good x than good y, while Susan is consuming equal amounts of x and y. What are the conditions for Pareto efficiency in an exchange economy? Are these consumption levels economically efficient?  Can these consumption allocations be observed in a perfectly competitive equilibrium in an exchange economy without production? Explain. b.  There are two firms in the economy. Each firm employs positive amounts of capital and labour. The technology satisfies diminishing marginal rate of technical substitution of labour for capital. Currently, A’s marginal rate of technical substitution of labour for capital is 4 while B’s marginal rate of technical…

Consider a market with two households (A and B) and two goods (X and Y). Each household holds 12 units of each good. Household A has a utility UA = 5 In LA + In yA when it consumes bundle (*A, YA). Household B hasa utility UB = In aB+5 Inyg when it consumes bundle (гв, ув). The market reaches an equilibrium when the price of each good is $1. Which, of the following sentences, correctly explains what happens in the market? Household A purchases 8 units of good X from household B. Household B purchases 8 units of good Y from household A. Household A purchases 7 units of good Y from household B. Household B purchases 7 units of good X from household A. Household A purchases 9 units of good X from household B. Household B purchases 9 units of good Y from household A. O Household A purchases 7 units of good X from household B. Household B purchases 7 units of good Y from household A. Household A purchases 9 units of good Y from household B. Household B purchases 9 units of good X from…

A date with Alex costs you $100 and gives you an additional 1000 units of utility. A date with Kelly costs you $200 and an additional 4,000 units of utility. Based only on the information you have, using the theory of rational choice, you most likely would: O be indifferent between the two dates O go on a date with Alex because the marginal utility per dollar is the greater of the two O go on a date with Kelly O go on a date with Alex

Tom has 500 dollars to spend on two goods, good 1 and good 2. The seller of good 1 offers Tom the following deal: For every three units (of good 1) you buy, you will get the fourth unit for free. Determine how many units of good 1 Tom will end up with if the price of good 1 is 3, the price of good 2 is 8, Tom spends all his income on the two goods and buys 9 units of good 2. Then enter the value below.

Bucky has $20 to spend on bowling and billiards. The prices of bowling and billiards are $4 and $1 por game, respectively. Assume he has a voucher for two free games of bowling Suppose bowling is the "X" good and billiards are the "Y" good How many games of bowling can Bucky afford? How many games of billiards can Bucky afford? Where is the "link" in Bucky's budget constraint where opportunity cost of billiards in terms of bowling games changes? (This should be answered as quantity of bowling games, quantity of billiards games)

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