QUESTION 1Alice (A) and Bob (B) have an endowment of goods 1 and 2, with Alice's endowment being (wf, wg) = (1,2) and Bob's endowment equals(wf, w) = (1,3). Alice's utility is given by ua(zf, x4) = 2 ln z4 + In z4, while Bob's utility is up(zf, x}) = In z? + 2 ln z}. Find thecompetitive (Walrasian) equilibrium prices in this pure exchange economy.Select one:O a.P1 = 5, P2 = 3%3DO b.P1 = 3, P2 = 7%3DO c.P1 = 7, P2 = 3O d. Pi = 1, P = 4Consider the same set up as in Question 1. Which of the following consumption bundles of consumer A belong to the contract curve?Select one:O a. rf = 1, xg = 1O b. af = 2, xg = 1O c. af = 1, xO d. af = 2, xg = 4%3D%3D3

We are going to solve this question using general equilibrium methodology which entails equality…

Answered: QUESTION 1 Alice (A) and Bob (B) have…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Consider an economy with 2 goods and 2 agents. The Örst agent has the utilityfunction, u (x1; x2) = ln x1 + 2 ln x2, and the other one has u (y1; y2) = 2 ln y1 + ln y2.The aggregate endowments of the 2 goods are given by (50; 100). Suppose there is asocial planner who cares about agents equally.(a) Set up the plannerís problem b) Calculate the first-best outcome (i.e., the social plannerís solution).
Astrid’s utility function is UA(HA,CA) = HA · CA. Birger’s utility function is UB(HB,CB) = min{HB , CB }. If Astrid’s initial endowment is no cheese and 5 units of herring and if Birger’s initial endowments are 6 units of cheese and no herring, then where p is a competitive equilibrium price of herring and cheese is the numeraire, it must be that demand equals supply in the herring market. This implies that i. 6/(p+1)+2.5=5. ii. 5/6 = p. iii. 6/p + 5/2p = 5. iv. 6/5 = p. v. min{5, 6} = p. The answer is i. Please show me how to get the answer. thank you!
4. Aaron and Burris have the following utility functions over two goods, x and y. Aaron’s utility function: UA(xA, yA) = min{xA/3, yA} Burris’s utility function: UB(xB, yB) = 9xB + 3yB Aaron’s endowment is eA = (2, 4). Burris’ endowment is eB = (10, 8). In an Edgeworth Box diagram, show which allocations are in the core. Solve for the set of Pareto optimal allocations (i.e. the contract curve) in the Edgeworth Box. Illustrate the contract curve in an Edgeworth Box diagram. Let good y be the numeraire (i.e. set py = 1 and let px = p). Solve for the Walrasian competitive equilibrium allocation and price ratio.
Consider the following pure exchange, Edgeworth box economy. There are two consumers, Adam and Mark, and two goods. Adam has an endowment of 7 units of good 1 and 3 units of good 2 (i.e. wadam = (7, 3)), while Mark has an endowment of 3 units of good 1 and 7 units of good2 (wmark$ = (3,7)). The consumers' utility functions are given by: Uadam = Xa1 + Xa2 and Umark = min{xm1, Xm2) where x¡1 is the consumption of good 1 by consumer (i = adam, mark) (a) Find the set of Pareto optimal allocations of this economy (b) Find the Walrasian equilibrium.
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Ma1. Please give only typed answer.
Consider the pure exchange economy with 2 goods, good 1 and good 2, and two consumers, consumer A and consumer B. The consumers have the following utility functions: UA(X1A,X2A)=X1A+3X2A; UB(X1B,X2B)=X1B +X2B. Consumer A is initially endowed with 4 units of good A and no unit of good 2, that is, consumer A's initial endowment is (w1A,W2A)=(4,0). Consumer B is initially endowed with 3 units of good 2 and no unit of good 1, that is, (w1B,W2B)=(0,3). In order to implement the allocation (x1A,X2A)=(0,1), (x1B,X2B)=(4,2) as a Walrasian equilibrium, what transfer of wealth should we make between the consumers if good 1 is the numeraire, that is, if p1 =1? An amount 7 of wealth should be transferred from consumer A to consumer B. O a. O b. None of the other answers. O c. An amount 3 of wealth should be transferred from consumer A to consumer B. O d. An amount 3 of wealth should be transferred from consumer B to consumer A. e. An amount 7 of wealth should be transferred from consumer B to…
Persons 1 and 2 have the following utility functions over goods x and y: Person 1: U1(x1, y1) = min{2x1, y1} Person 2: U2(x2, y2) = x2 + y2 Person 1 has an endowment of e1 = (2, 1). Betty’s endowment is e2 = (1, 2). Graph the Edgeworth Box for this economy. Draw each person’s indifference curve through the endowment point. Are there allocations that Pareto dominate the endowment? If so, show them on the diagram. Also, identify which allocations are Pareto optimal relative to the endowment point. Solve for the contact curve for this economy. Illustrate it in the Edgeworth Box.
Suppose that Abe and his brother Moe are lost in the desert and are in need of guidance to find an oasis. They can seek such guidance from either a burning bush or a golden calf. Abe has the following preferences: • If Moe chooses to talk to the golden calf, Abe prefers the outcome where he to chooses to talk to the golden calf than talk to the burning bush. • If Moe chooses to talk to the burning bush, Abe is indifferent between the outcome where he choose to talk to the burning bush and the outcome where he chooses to talk to the golden calf. • Regardless of his own decision, Abe prefers all outcomes where Moe talks to the burning bush than if he chose to talk to the golden calf. Moe has the following preferences: • If Abe chooses to talk to the golden calf, Moe prefers the outcome where he chooses to talk to the golden calf than talking to the burning bush. • If Abe chooses to talk to the burning bush, Moe prefers the outcome where he chooses to talk to the golden calf than talking…

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