A) PPF for Bob
As H on X axis , so Slope of PPF = Opportunity cost of production of H in terms of P
For Bob, to Produce 1 P, give up 4 H
Opportunity cost of 1 H = .25P
So Slope is = -1/4
eqn: Y = 1 - .25X
graph
For Jake
Opportunity cost of 1 H = 2P
Slope =- 2
eqn : Y = 2 - 2X
Graph
B)
Let TOT : 1 P= 2T
Then, then if Jake sells 1 P, it gets 2 T
So Consumption point : ( P, T) = (1,3)
For Bob
Gets 1 P for 2T
Consumption point : (P,T) = (2,2)
So both are better off, bcoz these points don't lie on ppf
(10 points) Consider a simple exchange economy with two people: Bob and Jake. Bob and Jake...
3. Consider an economy with two people, Yu and Jevon, and two commodities, clothing and food. Currently, Yu and Jevon would both be willing to give up two articles of clothing for five pieces of food. Further, the workers in town can, in a given day, produce either 45 pieces of clothing or 40 pieces of food is the allocation of resources in this economy Pareto efficient? (10 pts) If not, should there be more clothing or more food? (5...
4. Problems and Applications Q4 An economy consists of three workers: Dmitri, Jake, and Nick. Each works 10 hours a day and can produce two services: mowing lawns and washing cars. In an hour, Dmitri can either mow 1 lawn or wash 2 cars: Jake can either mow 1 lawn or wash 1 car; and Nick can either mow 2 awns or wash 1 car. For each of the scenarios listed in the following table, determine how many lawns will...
9) (10 points) Consider an exchange economy composed of two individuals A and B and two goods x1 and X2. A's utility function is given bỵ U,-2X1 + X2. Individual B's utility function is givenby u = xx2. In the economy, the total endowment of xņš 2 and the total endowment of x2 is 1. Normalize p2 to 1. We know that, in this economy eauilibrium price is given bypi-1. a. (6 points) Find the equilibrium allocation b. (4 points,...
Pure Exchange Model 1. Consider a Pure Exchange Economy with two agents A and B and two goods X and Y in which each agent acts competitively. Their preferences are given by the following utility function U(X,Y)=X13*Y23 Their initial endowments are as follows W=(5,20) w- (25,10) a) Calculate the demand functions for Good X and Good Y for each agent. b) State the equilibrium conditions for this economy. c) Using these conditions and the demand functions found in part a)...
Question 4: Consider two countries A & B with the following PPF's for production of cookies (C) and milk (M): Country A: C-100-5M Country B: C-20-0.5M Part A: In two separate graphs with C on the Y-axis and M on the X-axis, graph both PPFs. Part B: Determine which country has an absolute advantage in milk production. Part C: Determine which country has a comparative advantage in milk production. Part D: If the countries decide to trade, which good will...
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nformation P Flag question Consider a simple exchange economy where there are two producers, one producing Good X and the other Y. There are in total 100 units of K and 800 units of L in the economy. The production function of X Is X (KxLx)=10 K40.42X0.6 and that of Y is Y(Ky, Ly)= 4Ky + Ly Currently, the X production is using 60 units of K and 60 units of L. Follow the steps below to check if the...
10. Consider a pure exchange competitive market economy with two individ- uals, A and B, and two commodities, x and y, whose prices are denoted by px and py, respectively. Individual A lexicographically prefers x to y. Individual B's utility function is min{x,y}. Both individual A's and B's endowment is (50,50). A competitive equilibrium price ratio, Px/py, for this economy (a) exists and is equal to 1 (b) exists and is less than 1 (c) exists and is greater than...
Consider two individuals, Bill and Steve. Both can make cars and computers. Their production levels are outlined below: In one hour of time Bill can make: 7 Cars -or- 35 Computers. In one hour of time Steve can make: 4 Cars -or- 12 Computers. 1. What is Bill's opportunity cost of making one (1) Car? What is Steve's opportunity cost of making one (1) Car? 2. What is Bill's opportunity cost of making one (1) Computer? What is Steve's opportunity...
Problem 2.(20 points) Consider the following game: In the first step, Alice has two $10 bills and can take one of the following two actions: (i) she can give S20 to Bob or (ii) she can give one of the S10 bills to Bob. All the money will be used to buy popcorns before the movie they will see. Each one dollar of popcorn gives one unit of payoff for the player who buys it. In the second step, they...