Question 4: Finding Contract Curve and Competitive equilibrium Price In a pure exchange economy with two goods, G and H, the two traders have Cobb-Douglas utility functions. Suppose that Trinity's utility function is UT = GT HT, and Miyoung's utility function is UM = GM (HM)². Between them, they own 100 units of G and 50 units of H. Solve for their contract curve. a. b. Determine P, the competitive price of G, where the price of H is normalized to equal one.

Pure exchange economy with no free disposal. There is also i=,l- el = (2, 8) and ell = (8, 2) Utility function ui : R 2+R ul (xI ) = (xI,1)2+ (xI,2) 2 and ulI (xII ) = max{2XII,1 + xII,2, xII,1 + 2XII,2} Find Edgeworth-Box Solution (all kinds of allocations needed - ind. rational, pareto, weakly pareto, core)

Question 3.For a two-person two goods exchange economy, provide a formal definition of a barter equilibrium and formally demonstrate that such allocations are in the core of the economy.

Which of the following is a preferential agreement? the Trans-Pacific Partnership (TPP) O the Transatlantic Trade and Investment Partnership (TTIP) O the Caribbean Basin Initiative (CBI) O the Asia-Pacific Economic Cooperation (APEC) O None of the above.

5. Given that excess demands are continuous and satisfy Walras' law, use Brouwer's Fixed Point Theorem to establish the existence of competitive equilibrium in a simple exchange economy. Suppose that an apple orchard is located next to a bee keeper. If the orchard produces x apples and the bee keeper produces y honey and the cost functions of the two are as follows: C(x) = x² + 10x +9 C(y) = y² - 8x What will be the socially optimal amount of apples that can be produced? How does this compare to privately optimal amount?

4

. Explain trade gains graphically and also split trade gains into exchange gains and specialization gain. Also define offer curve and show that equilibrium achieved through offer curves is an unstable equilibrium.

When a country specializes in the production of a good, this means that it can produce this good at a lower opportunity cost than its trading partner. Because of this comparative advantage, both countries benefit when they specialize and trade with each other. The following graphs show the production possibilities frontiers (PPFS) for Maldonia and Lamponia. Both countries produce lemons and sugar, each initially (i.e., before specialization and trade) producing 24 million pounds of lemons and 12 million pounds of sugar, as indicated by the grey stars marked with the letter A. (? (?) Maldonia Lamponia 64 64 56 56 48 PPF 48 40 40 32 32 24 24 PPF 16 16 16 24 32 40 48 56 64 16 24 32 40 48 56 64 LEMONS (Millions of pounds) LEMONS (Millions of pounds) Maldonia has a comparative advantage in the production of production of while Lamponia has a comparative advantage in the . Suppose that Maldonia and Lamponia specialize in the production of the goods in which each has a comparative advantage.…

4. General Equilibrium 1) : Consider, U1 (21, y1) = 5(x141) U2(r2, Y2) = Inx, + 5lny, W = (6,4) and W2 = (3,6) a. Characterize the Pareto efficient allocations and contract curve b. Which allocations are in the core c. Find the Competitive/Walrasian equiiîbrium for this problem d. Is the answer of c in the core

Assume M's monetary weight equals $4. The monetary weight for 1, and 1, is $2 each; the monetary weight for I, and 1, and is $3 each. Where, if any, is the Nash Equilibrium?