Question 1

In a pure exchange economy, if an allocation is Pareto efficient, it is impossible to have two people who prefer each other's consumption bundles to their own.

Accepted Answer

A) True 
 B)False

Question 2

Hatfield and McCoy burn with hatred for each other.They both consume corn whisky.Hatfield's utility function is U = WH - W 2M / 8 and McCoy's utility is U = WM - W 2H / 8, where WH is Hatfield's whisky consumption and WM is McCoy's whisky consumption, measured in gallons.The sheriff has a total of 58 gallons of confiscated whisky which he could give back to them.For some reason, the sheriff wants them both to be as happy as possible and he wants to treat them equally.The sheriff should give them each

Accepted Answer

A) 2 gallons and spill 54 gallons in the creek. 
B) 4 gallons and spill 50 gallons in the creek. 
C) 29 gallons. 
D) 8 gallons and spill the rest in the creek. 
E) 1 gallon and spill the rest in the creek. 
A) 2 gallons and spill 54 gallons in the creek. 
B) 4 gallons and spill 50 gallons in the creek. 
C) 29 gallons. 
D) 8 gallons and spill the rest in the creek. 
E) 1 gallon and spill the rest in the creek.

Question 3

Suppose that Paul and David have utility functions U = 4A P + O P and U = A D + 5O D, respectively, where A P and O P are Paul's consumptions of apples and oranges and A D and O D are David's consumptions of apples and orange.The total supply of apples and oranges to be divided between them is 20 apples and 14 oranges.The "fair" allocations consist of all allocations satisfying the following conditions.

Accepted Answer

A) 4AP + OP is at least 94 and 2AD + 5OD is at least 90. 
B) AD + OD is at least 17 and AS + OS is at least 17. 
C) AD = AP and OD = OP. 
D) 8AP + 2OP is at least 94 and 2AD + 10OD is at least 90. 
E) 4AP + OP is at least AD + 5OD and AD + 5OD is at least 4AP + OP. 
A) 4AP + OP is at least 94 and 2AD + 5OD is at least 90. 
B) AD + OD is at least 17 and AS + OS is at least 17. 
C) AD = AP and OD = OP. 
D) 8AP + 2OP is at least 94 and 2AD + 10OD is at least 90. 
E) 4AP + OP is at least AD + 5OD and AD + 5OD is at least 4AP + OP.

Question 4

Mr.Angst has two children, Dick and Jane.Dick is a slow learner and Jane is very bright.If Mr.Angst spends $X per month on Dicks education, Dick will score a total of X/2 points on his SAT tests.If Mr.Angst spends $Y per month on Janes education, she will score a total of 2Y on her SAT tests.Mr.Angst has a utility function U(D, J)= min{D, J}, where D is Dicks SAT score and J is Janes SAT score.To maximize his utility, he will spend

Accepted Answer

A) equal amounts of money on the two children. 
B) 4 times as much money on Dick's education as on Jane's. 
C) 4 times as much money on Jane's education as on Dick's. 
D) between 1 and 2 times as much money on Dick's education as on Jane's. 
E) between 1 and 2 times as much money on Jane's education as on Dick's. 
A) equal amounts of money on the two children. 
B) 4 times as much money on Dick's education as on Jane's. 
C) 4 times as much money on Jane's education as on Dick's. 
D) between 1 and 2 times as much money on Dick's education as on Jane's. 
E) between 1 and 2 times as much money on Jane's education as on Dick's.

Question 5

Suppose that Paul and David have utility functions U = 4A P + O P and U F= A D + 4O D, respectively, where A P and O P are Paul's consumptions of apples and oranges and A D and O D are David's consumptions of apples and oranges.The total supply of apples and oranges to be divided between them is 20 apples and 12 oranges.The fair allocations consist of all allocations satisfying the following conditions.

Accepted Answer

A) AD = AP and OD = OP. 
B) 8AP + 2OP is at least 92 and 2AD + 8OD is at least 68. 
C) 4AP + OP is at least 92 and 2AD + 4OD is at least 68. 
D) AD + OD is at least 16 and AS + OS is at least 16. 
E) 4AP + OP is at least AD + 4OD and AD + 4OD is at least 4AP + OP. 
A) AD = AP and OD = OP. 
B) 8AP + 2OP is at least 92 and 2AD + 8OD is at least 68. 
C) 4AP + OP is at least 92 and 2AD + 4OD is at least 68. 
D) AD + OD is at least 16 and AS + OS is at least 16. 
E) 4AP + OP is at least AD + 4OD and AD + 4OD is at least 4AP + OP.

Question 6

Suppose that Romeo has the utility function U = S 5RS1J and Juliet has the utility function U = S1RS5J, where SR is Romeo's spaghetti consumption and SJ is Juliet's.They have 48 units of spaghetti to divide between them.

Accepted Answer

A) Juliet would want to give Romeo some spaghetti if she had more than 38 units. 
B) Romeo would want to give Juliet some spaghetti if he had more than 24 units of spaghetti. 
C) Romeo and Juliet would never disagree about how to divide the spaghetti. 
D) Romeo would want to give Juliet some spaghetti if he had more than 36 units of spaghetti. 
E) Juliet would want to give Romeo some spaghetti if she had more than 40 units of spaghetti. 
A) Juliet would want to give Romeo some spaghetti if she had more than 38 units. 
B) Romeo would want to give Juliet some spaghetti if he had more than 24 units of spaghetti. 
C) Romeo and Juliet would never disagree about how to divide the spaghetti. 
D) Romeo would want to give Juliet some spaghetti if he had more than 36 units of spaghetti. 
E) Juliet would want to give Romeo some spaghetti if she had more than 40 units of spaghetti.

Question 7

Suppose that Paul and David have utility functions U = 4A P + O P and U = A D +3O D, respectively, where A P and O P are Paul's consumptions of apples and oranges and A D and O D are David's consumptions of apples and oranges.The total supply of apples and oranges to be divided between them is 18 apples and 18 oranges.The fair allocations consist of all allocations satisfying the following conditions.

Accepted Answer

A) AD = AP and OD = OP. 
B) 8AP + 2OP is at least 90 and 2AD + 6OD is at least 72. 
C) 4AP+OP is at least 90 and 2AD + 3OD is at least 72. 
D) AD = OD is at least 18 and AS + OS is at least 18. 
E) 4AP + OP is at least AD +3OD and AD + 3OD is at least 4AP + OP. 
A) AD = AP and OD = OP. 
B) 8AP + 2OP is at least 90 and 2AD + 6OD is at least 72. 
C) 4AP+OP is at least 90 and 2AD + 3OD is at least 72. 
D) AD = OD is at least 18 and AS + OS is at least 18. 
E) 4AP + OP is at least AD +3OD and AD + 3OD is at least 4AP + OP.

Exam 32: Welfare-Part A

In a pure exchange economy, if an allocation is Pareto efficient, it is impossible to have two people who prefer each other's consumption bundles to their own.

Suppose that Romeo has the utility function U = S 5RS1J and Juliet has the utility function U = S1RS5J, where SR is Romeo's spaghetti consumption and SJ is Juliet's.They have 48 units of spaghetti to divide between them.

Budget Constraint-Part A

Budget Constraint-Part B

Preferences-Part A

Preferences-Part B

Utility-Part A

Utility-Part B

Choice-Part A

Choice-Part B

Demand-Part A

Demand-Part B

Revealed Preference-Part A

Revealed Preference-Part B

Slutsky Equation-Part A

Slutsky Equation-Part B

Buying and Selling-Part A

Buying and Selling-Part B

Intertemporal Choice-Part A

Intertemporal Choice-Part B

Asset Markets-Part A

Asset Markets-Part B

Uncertainty-Part A

Uncertainty-Part B

Risky Assets-Part A

Risky Assets-Part B

Consumers Surplus-Part A

Consumers Surplus-Part B

Market Demand-Part A

Market Demand-Part B

Equilibrium-Part A

Equilibrium-Part B

Auctions-Part A

Auctions-Part B

Technology-Part A

Technology-Part B

Profit Maximization-Part A

Profit Maximization-Part B

Cost Minimization-Part A

Cost Minimization-Part B

Cost Curves-Part A

Cost Curves-Part B

Firm Supply-Part A

Firm Supply-Part B

Industry Supply-Part A

Industry Supply-Part B

Monopoly-Part A

Monopoly-Part B

Monopoly Behavior-Part A

Monopoly Behavior-Part B

Factor Markets-Part A

Factor Markets-Part B

Oligopoly-Part A

Oligopoly-Part B

Game Theory-Part A

Game Theory-Part B

Game Applications-Part A

Game Applications-Part B

Behavioral Economics

Exchange-Part A

Exchange-Part B

Production-Part A

Production-Part B

Welfare-Part B

Externalities-Part A

Externalities-Part B

Information Technology-Part A

Information Technology-Part B

Public Goods-Part A

Public Goods-Part B

Asymmetric Information-Part A

Asymmetric Information-Part B

Filters

Suppose that Romeo has the utility function U = S ⁵_RS¹_J and Juliet has the utility function U = S¹_RS⁵_J, where S_R is Romeo's spaghetti consumption and S_J is Juliet's.They have 48 units of spaghetti to divide between them.