Homework Answers
A) False
Reason: In case of perfect substitutes, the MRS is always equal to 1
That is, people are willing to give up one unit of a good in exchange for one unit of another good
B) An allocation is efficient when the MRS (A) = MRS (B) = PX/PY
That is, A has the same preference for substituting the two goods, as B
Since MRS = MUX/MUY
If MRS of A is greater than MRS of B, then if A increases his consumption of X and B reduces his consumption of X in favor of Y, then the MRS of the two consumers can become equal, thereby making the allocation efficient.
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a) True or false: If goods are perfect substitutes, then the MRS can never equal 1....
1. True or False, and explain briefly. 1) The assumption that more is better implies that...
1. True or False, and explain briefly. 1) The assumption that more is better implies that the indifference curves are upward sloping 2) Convexity of indifference curves implies that consumers are willing to give up more to get an extra the more they have 3) Consider the following three bundles. Bundle Good Goody If Bundles A and B are on the same indifference curve, preferences satisfy all the usual assumptions introduced in the lecture, Bundle Cis preferred to Bundle A...
Consider a pure exchange economy with two consumers and two goods. Total endowments of the two...
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True or false. Your answer to each question should not extend beyond 3 to 5 sentences...
True or false. Your answer to each question should not extend beyond 3 to 5 sentences (i.e., short succinct answers are preferred). a. A firm’s marginal rate of technical substitution captures the firm’s willingness to trade capital for labour, but not the degree to which capital and labour are substitutes in supply. True or false? Explain your position. b. A consumer in an exchange economy will always be better off at an allocation which is Pareto efficient than at an...
17. In a two person-two good economy, goods X and Y are perfect complements for John and Mary. There are 12 units of X and 6 units of Y available. Initially, John has 8 units of X and 2 units of...
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1. Oscar and Elmo make up a simple exchange economy where the only goods are books and cookies Total books 10 Total cookies - a) Elmo has 7 books and 2 cookies. Draw the Edgeworth box Label the endowment with co and how much each person is consuming (or reading) at that point. Also label Elmo's origin (Op) and Oscar's origin (Oo), and label along which axis each good is increasing for each person b) On your graph from part...
1. Evaluate whether the statement is true or false. Explain why Competitive firm never produces when it is making a...
1. Evaluate whether the statement is true or false. Explain why Competitive firm never produces when it is making a negative profit. a. b. In cost minimization, as wage increases, a firm will always decreases labour input Long run market supply curve in perfect competition is horizontal C. d. If price is lower than equilibrium price, consumer surplus is higher than the equilibrium since consumers can enjoy lower price.
1. Evaluate whether the statement is true or false. Explain why...
Oscar and Elmo make up a simple exchange economy where the only goods are books and...
Oscar and Elmo make up a simple exchange economy where the only goods are books and cookies. Total books = 10 Total cookies = 5 a) Elmo has 7 books and 2 cookies. Draw the Edgeworth box. Label the endowment with ω and how much each person is consuming (or reading) at that point. Also label Elmo’s origin (OE) and Oscar’s origin (OO), and label along which axis each good is increasing for each person. b) On your...
QUESTION 17 PLEASE. NA compare them with your findings in part (b). 17. In a two person-two good economy, goods X and Y...
QUESTION 17 PLEASE.
NA compare them with your findings in part (b). 17. In a two person-two good economy, goods X and Y are perfect complements for John and Mary. There are 12 units of X and 6 units of Y available. Initially, John has 8 units of X and 2 units of Y and Mary has 4 units of X and 4 units of Y. (a) Draw an Edgeworth Box associated with this economy. Show the initial allocation and...
Anything will help Consider a pure exchange economy with two goods, wine (x) and cheese (y)...
Anything will help
Consider a pure exchange economy with two goods, wine (x) and cheese (y) and two con- sumers, A and B. Let cheese be the numeraire good with price of $1. Consumer A's utility function is UA(x, y) = xy and B's utility function is UB(x, y) = min [x, y). A has an initial allocation of 10 x and no y, and B has an initial allocation of 10 units of y and no x. (a) Put...
Consider a pure exchange economy with two goods, wine (x) and cheese (y) and two con-...
Consider a pure exchange economy with two goods, wine (x) and cheese (y) and two con- sumers, A and B. Let cheese be the numeraire good with price of $1. Consumer A's utility function is UA(x; y) = 2x+y and B's utility function is UB(x; y) = xy. A's initial allocation is 10 units of x and 0 units of y. B's initial allocation is 0 units of x and 30 units of y. (a) Put wine x on the...
1. True or False, and explain briefly. 1) The assumption that more is better implies that the indifference curves are upward sloping 2) Convexity of indifference curves implies that consumers are willing to give up more to get an extra the more they have 3) Consider the following three bundles. Bundle Good Goody If Bundles A and B are on the same indifference curve, preferences satisfy all the usual assumptions introduced in the lecture, Bundle Cis preferred to Bundle A...
17. In a two person-two good economy, goods X and Y are perfect complements for John and Mary. There are 12 units of X and 6 units of Y available. Initially, John has 8 units of X and 2 units of Y and Mary has 4 units of X and 4 units of Y Draw an Edgeworth Box associated with this economy. Show the initial allocation and plot the (a) i both John and Marry that pass through the initial...
1. Oscar and Elmo make up a simple exchange economy where the only goods are books and cookies Total books 10 Total cookies - a) Elmo has 7 books and 2 cookies. Draw the Edgeworth box Label the endowment with co and how much each person is consuming (or reading) at that point. Also label Elmo's origin (Op) and Oscar's origin (Oo), and label along which axis each good is increasing for each person b) On your graph from part...
1. Evaluate whether the statement is true or false. Explain why Competitive firm never produces when it is making a negative profit. a. b. In cost minimization, as wage increases, a firm will always decreases labour input Long run market supply curve in perfect competition is horizontal C. d. If price is lower than equilibrium price, consumer surplus is higher than the equilibrium since consumers can enjoy lower price.
1. Evaluate whether the statement is true or false. Explain why...
QUESTION 17 PLEASE.
NA compare them with your findings in part (b). 17. In a two person-two good economy, goods X and Y are perfect complements for John and Mary. There are 12 units of X and 6 units of Y available. Initially, John has 8 units of X and 2 units of Y and Mary has 4 units of X and 4 units of Y. (a) Draw an Edgeworth Box associated with this economy. Show the initial allocation and...
Anything will help
Consider a pure exchange economy with two goods, wine (x) and cheese (y) and two con- sumers, A and B. Let cheese be the numeraire good with price of $1. Consumer A's utility function is UA(x, y) = xy and B's utility function is UB(x, y) = min [x, y). A has an initial allocation of 10 x and no y, and B has an initial allocation of 10 units of y and no x. (a) Put...
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