Consider the following two economies: t = 1; 2. u(c) = log(c). = 1. delta = 1. F(K) = KO:5. K1 = 1 t = 1; 2. u(c) = log(c). = 1. delta = 1. F(K) = KO:5. K1 = 4 Setup the social planner problem for both economies, and show the equations that characterize its solution. Calculate the total utility enjoyed by consumers in both economies. Does having 4 times more initial capital make you four times happier? Why?

Consider the following two economies: t = 1; 2. u(c) = log(c). = 1. delta = 1. F(K) = KO:5. K1 = 1 t = 1; 2. u(c) = log(c). = 1. delta = 1. F(K) = KO:5. K1 = 4 Setup the social planner problem for both economies, and show the equations that characterize its solution. Calculate the total utility enjoyed by consumers in both economies. Does having 4 times more initial capital make you four times happier? Why?

Economics: Private and Public Choice (MindTap Course List)

16th Edition

ISBN:9781305506725

Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Chapter2: Some Tools Of The Economist

Section: Chapter Questions

Problem 14CQ

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