Consider an economy with two goods, cloth and food. The production possibility frontier ofthis economy is given by Q, +Q = 8000. Preferences of the consumers are described bythe following utility function U(Qc,Q;) =/Q.QF:Suppose this economy can trade with the rest of the world at the relative price of cloth tofood equal 2. How much food will this economy import?

U = QCQF QC2 + QF2 = 8000 L = QCQF + λ(8000-QC2-QF2) ∂L∂Qc = QF2QCQF - 2QCλ = 0 ∂L∂QF = QC2QCQF -…

Answered: Consider an economy with two goods,…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

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