Consider an exchange economy with two goods, 200 agents of type A, and 100 agents of type B. The preferences of agents of type A can be represented by the utility function u4(x1, 22) = VI1, those of type B by uB (x1, x2) = 2x2. Initial endowments are given by wA = (10, 20) and wB = (20, 10). Mark the correct answers: (Hint: A sketch of the Edgeworth box may be helpful) Select one or more: a. The equilibrium allocation is Pareto efficient. b. In the Walrasian equilibrium, each consumer of type A consumes 10 units of good 1. C. The initial endowment allocation is an equilibrium allocation.

Consider an exchange economy with two goods, 200 agents of type A, and 100 agents of type B. The preferences of agents of type A can be represented by the utility function u4(x1, 22) = VI1, those of type B by uB (x1, x2) = 2x2. Initial endowments are given by wA = (10, 20) and wB = (20, 10). Mark the correct answers: (Hint: A sketch of the Edgeworth box may be helpful) Select one or more: a. The equilibrium allocation is Pareto efficient. b. In the Walrasian equilibrium, each consumer of type A consumes 10 units of good 1. C. The initial endowment allocation is an equilibrium allocation.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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