ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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- The fundamental problem of welfare economics is to determine at which feasible allocation the economy should operate. Discuss the challenges of aggregating individual preferences into social preferences in order to identify the socially optimal allocation.arrow_forwardSuppose there are two consumers A and B, and two goods x and y. A's utility function has the following form UA = XA - (XB)1. Which of the following is true? Consumer A's consumption of good x exhibits a negative externality. Consumer A's consumption of good x exhibits a positive externality. Consumer B's consumption of good x exhibits a negative externality. Consumer B's consumption of good x exhibits a positive externality.arrow_forwardD2arrow_forward
- Problem 5: Consider an economy with production. The production functions for goods X and Y are given by: Y = = La Ly ဇာ where Lx +Ly = I. The utility function of the representative consumer is given by: U (x, y) = min {}} where all the parameters are positive. Determine the Walrasian equilibrium quantities of X and Y produced and sold in this economy.arrow_forwardPerson 1 and person 2 are the only two residents of an economy. Person i (where i is either 1 or 2) has the utility function Here, Yi is person i’s income and β is parameter between 0 and 1. Assume that the social welfare function is where α is a parameter between 0 and 1. Initially, person 1’s income is 1 and person 2’s income is 2. a) Express W in terms of Y1 and Y2. If a social indifference curve shows all the pairs (Y1, Y2) that yield the same value of W, what would a social indifference curve look like if it were drawn in the (Y1, Y2) quadrant? Find an algebraic expression for the slope of a social indifference curve. b) Imagine that income redistribution is costless, in the sense that the economy can reach any pair (Y1, Y2) that satisfies the condition Draw a graph of the attainable pairs in the (Y1, Y2) quadrant. This set is called the “utility possibility frontier.” Using this frontier and the social indifference curves,…arrow_forwardIf all markets are perfectly competitive, and general equilibrium prices hold in every market in an economy, then, compared to the equilibrium allocation: Group of answer choices Every consumer must be made worse off by any trade of goods between consumers. Any trade of inputs between two firms must reduce output for one of them. Any trade of inputs between two firms must reduce output for both of them. All consumers can be made better off by producing more of one good and less of another.arrow_forward
- Q4 Agent A's marginal valuation of the first unit is MVA $3 and agent B's marginal valuation of the first unit is MVB = $4. Suppose that agent A owns one unit while agent B holds no unit. Then, assuming that each agent maximizes his/her gains from trade, A. 1 unit for agent A and O unit for agent B is an efficient allocation. B. 1 unit for agent B and O unit for agent A is an efficient allocation. C. There is mutually beneficial trading between agent A and agent B at a price of 3arrow_forwardSuppose the Social Welfare Function is given by U = X0.25Y0.75 and the PPF is given by: X2+Y2 = 100, solve for X* and Y*arrow_forwardConsider an Edgeworth box economy where preferences are given by u'lx},x3) = x} + Inx and uaf,x3) = xi, and the initial endowments are e' = (1,3) and e² = (3,1). Find all the Walrasian equilibrium. You may assume that the solution is inte- rior.arrow_forwardQuestion 2 of 12, Step 1 of 1 1/12 Correct Consider a company that produtes Good A and Good B. The equation of the PPF is 9x + 3y² 18,900, where is the quantity of Good A and y is the quantity of Good B. This year, the company produces 30 units of Good A and 60 units of Good B. Then, a new technology allows the company to reduce the quantity of resources required for Good Aby 1.5 times How much of Good A will the company produce at the same quantity of Good B? If necessary, round any intermediate calculations to one decimal place, and round your final answer to the nearest whole number. Answer units Keypad Keyboard Shortcutsarrow_forwardConsider an Edgeworth box economy, where preferences and endowments are given by. ( attached below ) In the following, use the normalization p2 = 1.(a) Find all the Pareto optimal allocations (use x1 to parameterize thePO allocations). (b) Suppose the government wants individual 1 to have the bundle x1 = (5, 9). Show whether the government can induce this outcome an equilib- rium with transfers. Find the supporting prices and transfers if possible. (c) State the Second Fundamental Theorem of Welfare and explain how the result in part (b) relates to that theorem. (d) Suppose the government does not care what bundle individual 1 gets and only wants to ensure that the individual 1 receives utility level equal to 45. Show whether this can be achieved as an equilibrium with transfers. Find the supporting prices and transfers if possible.arrow_forwardWhen goods are allocated in a way that creates the largest economic surplus: output is evenly allocated across firms. production is minimized. efficient allocation has been achieved. the marginal benefit of the last unit bought is the maximum marginal benefit.arrow_forwardarrow_back_iosSEE MORE QUESTIONSarrow_forward_ios
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