Is the monopoly solution better than the initial endowment

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Reference no: EM131357638

Open Word and answer the following questions. Save the document and print it when you are done.

1. Is the monopoly solution better than the initial endowment? Explain. Hint: Use Figure 3.2.4.4 as a reference.

2. Suppose A really liked x₁, so that cA (cell B21) was 2. How would this change A's utility maximizing price of x₁? What is the monopoly solution? Describe your procedure.

3. In an earlier chapter, we used a supply and demand (partial equilibrium) analysis to show that price ceilings in a competitive market cause an inefficient allocation of resources. Use Word's Drawing Tools to create an Edge worth Box with a price ceiling on x₁. Explain why price ceilings are undesirable in this general equilibrium setting.

Reference no: EM131357638

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