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Suppose that Hannah’s utility function is UH = 4C + 3T and that Jose’s utility function is UJ = 3C + 4T, where C is pounds of coffee per year and T is pounds of tea per year. Suppose there are fixed amounts of 28 pounds of coffee per year and 21 pounds of tea per year. Suppose also that the initial allocation is 15 pounds of coffee to Hannah (leaving 13 pounds to Jose) and 10 pounds of tea to Hannah (leaving 11 pounds of tea to Jose). Plot C on the horizontal axis and T on the vertical axis. a) What do the utility functions say about the marginal rate of substitution of tea for coffee for Hannah, MRSCT Hannah, and the marginal rate of substitution of tea for coffee for Jose, MRSCT Jose, respectively. b) Draw the Edgeworth Box showing indifference curves and the endowment, i.e., the initial allocation. c) Is the initial allocation of coffee and tea Pareto efficient? Indicate the Paretoimproving moves that would result. Draw the contract curve on the Edgeworth box. d) Compare your contract curve with the conventional contract curve depicted in the text.
If there are multiple highest bids, then the winner is the bidder whose valuation is the highest or whose index is the smallest among the highest bidders.
The following figure plots the average farm prices of potatoes in the United States for the years 1989 to 1998 versus the annual per capita consumption. Each point represents the price and quantity data for a given year. Explain whether simply drawin..
The Automotive Supply Company has a small plant that produces speedometers exclusively. Its annual fixed costs are $30,000, and its variable costs are $10/unit. It can sell a speedometer for $25. How many speedometers must the company sell to break e..
Determine if each of the following value functions is loss averse.
Expand his shop in that way allowing more customers to be served on a Saturday morning?
What adverse effects on the domestic economy may follow from (a) a depreciation of the exchange rate and (b) an appreciation of the exchange rate.
He starts this year with nothing in the bank and ends next year with nothing in the bank. Draw his budget constraint in E1 - E2 space.
Describe the extent of economic integration, specifically mentioning the country’s membership(s) within regional trade agreements and the benefits they bring to the country.
The reading summarizes powers granted by the Constitution - some powers are granted to the Federal government, some powers are granted to state and local governments, some powers are shared. After reviewing the assigned material on these powers, choo..
A piece of equipment that was purchased two years ago for $59,000 was expected to have a useful life of 5 years with a $5,000 salvage value. Since its performance was less than expected, it was upgraded for $20,000 one year ago. Increased demand now ..
Maria is a hostess at a local restaurant. When she earned $8 per hour, she worked 35 hours per week. When her wage increased to $10 per hour, she decided to work 40 hours. However, when her wage increased again to $12 per hour, she decided to cut bac..
Suppose that the price elasticity of demand for potatoes is -.3 and that the price of potatoes were to drop by 10%. A. What will happen to the quantity of potatoes demanded?
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