Consider an economy with two goods, cloth and food. The production possibility frontier of this economy is given by Q +Q = 8000. Preferences of the consumers are described by the following utility function U(Qc,QF)=/QcQF. %3D Suppose this economy can trade with the rest of the world at the relative price of cloth to food equal 2. How much food will this economy import?
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- 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.In an exchange economy, there are two people (Shadi and Nino) and two goods (x1 and x2). Their initial endowments are ωS = (2, 4) and ωN = (3, 6). Their utility is given by the following functions: US(x1,x2) = x12x23 and UN(x1,x2) = x1x24. Which of the following is the equation for the contract curve? Group of answer choices a. x2N = 96x1N / (15 + 4x1N) b. x2N = 47x1N / (8 + 4x1N) c. x2N = 91x1N / 5 d. x2N = 16x1N / (3 + x1N) e. x2N = 41x1N / (9 + x1N)Suppose that there are two countries in the world, USA and Australia, and that each country consumes a tradable good with international price PT = P ∗ T = 2. Assume also that each country consumes local transportantion, a non-tradable service, where the price for nontradables in USA is PN = 1 and in Australia it is P ∗ N =2. Suppose that the law of one 2 price holds for tradable goods and assume that the pricing index φ(P1, P2) = P1^0.5 *P2^0.5, which satisfies the properties discussed in class. (i) Assume that the law of one price holds. What is the value of the nominal exchange rate? (ii) Express the real exchange rate e as a function of relative prices of non-tradables to tradables in Australia and USA, and calculate its value. (iii) How would a tax to local transportation in Australia affect the real exchange rate? (iv) Use the Balassa-Samuelson theory discussed in class to express the real exchange rate in terms of relative productivities of tradable and non-tradable sectors in…
- Consider a 2-good, 2-agent pure exchange economy where there are 10 units of each good and preferences are represented by UA, UB: RR where uA (XA) = 2XA1 + XA2 and uB (XB) = XB1 + 2XB2- Which 2 of the following 8 options are true: There are initial endowments from which we can have a Walrasian Equilibrium with prices p = (1, 0). O The only Pareto efficient allocation is XA = (10, 0), XB = (0, 10). Every Pareto efficient allocation can be supported as a Walrasian Equilibrium after some reallocation of resources. We cannot apply the First Welfare Theorem because preferences violate local non-satiation. The allocation XA = (5, 10), XB = (5, 0) is Pareto efficient. For all price vectors PER3 we have p1z₁ + P2z2 = 0 where z; is the excess demand of good i € {1, 2}. O Preferences of both players satisfy strict convexity. At initial endowment eA= (5, 5), eg = (5, 5), there is a Walrasian Equilibrium with prices p = (1, 2).Various international crises and issues periodically raise the price of oil imports, which can send ripple effects throughout the economy. While it might not be the producer that other countries are, the U.S. has vast supplies of oil. What is a likely reason it still imports oil despite the impact of these international influences on prices? Group of answer choices Importing oil allows the U.S. to focus on developing other industries. The U.S.’s environmental standards are too high to produce oil domestically. The opportunity costs of producing all oil products domestically must still be higher than importing. The U.S. is trying to prop up its political partners by importing their oil.Having rejected a tariff on textiles (a tax on imports), the president of Isoland is now considering the same-sized tax on textile consumption (including both imported and domestically produced textiles). Under a textile consumption tax, the quantity of textiles consumed in Isoland will be (SAME AS, HIGHER , LOWER) the quantity consumed under a tariff, and the quantity produced in Isoland will be (SAME AS, HIGHER , LOWER) the quantity produced under a tariff. The following table shows the effect of an import tariff on the nation of Isoland. Compared to the consumption tax, the tariff raises (LESS, MORE , SAME AMOUNT) revenue for the government and has (SMALLER, LARGER, EQUAL SIZE) deadweight loss associated with it.
- There are two countries Home and Foreign. Home has 1,200 units of labor available. It can produce two goods, apples and bananas. The unit labor requirement in apple production is 3, while in banana production it is 2. Foreign has a labor force of 800. Foreign's unit labor requirement in apple production is 5, while in banana production it is 1. Suppose world relative demand takes the following form: Demand for apples/demand for bananas = price of bananas/price of apples a-b. On the graph to the right: 1.) Using the 3-point curved line drawing tool, draw the relative demand curve. Label the curve RD. 2) Using the point drawing tool, indicate the equilibrium relative price of apples. Label this point EQ. Carefully follow the instructions above and only draw the required objects. 2 Relative price of apples Pa/Pb 0 035 0.75 05 Relative quantity of apples RSQuestion 5 Consider a competitive exchange economy with two individuals (A and B) and two goods (x and y). Consumer A is initially endowed with 4 units of good x and 4 units of good y. Consumer A has the following demands for goods x and y: MA MA and TA YA 2px 2Py Consumer B is initially endowed with 16 units of good x and 1 unit of good y. Consumer B has the following demands for goods x and y: MB MB and ув IB = 2Pz 2py where mд is the market value of consumer A's endowment and mß is the market value of consumer B's endowment. At the resulting competitive equilibrium, what is the price of good x (with the price of good y normalised to 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 Susan. Mohammed and David are both
- Heckscher-Ohlin: Consider an economy with two goods (corn and potatoes), both produced using capital and labor. Both factors can freely move across sectors. The technologies for the two sectors are given by the following Cobb-Douglas production functions:Consider an exchange economy with two types of agents, A and B, and two goods, x and y. Preferences are given by UA (XA, YA) = = A + 6 ln(y₁) and UB(TB, YB) = ln(TBYB). Suppose the government wants to reach the goal of XB = 5 with the competitive equilibrium by setting a redistribution r such that w₁ = (10,r) and wB = (0,20 - r). 1. Find r reaches the government's goal. Round your answer to 2 decimal points. Let Py = Answer:Consider a company that produces TVs and tablets. The PPF curve for this company is represented by the equation 7x2+4y2=13,9487x2+4y2=13,948, where xx is the quantity of TVs and yy is the quantity of tablets. Using this equation, how many tablets can the company make if it produces 2626 TVs? Enter your answer in the box below and round your final answer to the nearest whole number if necessary.