Exam 32:Exchange-Part A

Teresa and Jean-Pierre both consume the same goods in a pure exchange economy.Teresa is originally endowed with 9 units of good 1 and 6 units of good 2.Jean-Pierre is originally endowed with 91 units of good 1 and 14 units of good 2.They both have the utility function U(x₁,x₂)=x^1/3₁x^2/3₂.If we let good 1 be the numeraire,so that p₁ =$1,then what will be the equilibrium price of good 2?

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Question 1

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Sheila and Ivan live in an isolated valley and trade with no one but each other.They consume only apples and oranges.Sheila has an initial endowment of 6 apples and 19 oranges.Ivan has an initial endowment of 18 apples and 20 oranges.For Sheila,the two goods are perfect substitutes,one for one.For Ivan,they are perfect complements,one for one.At all Pareto efficient allocations,

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Question 2

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Abduls utility is U(X A,Y A)=min{X A,Y A},where X A and Y A are his consumptions of goods X and Y respectively.Babettes utility function is U(X B,Y B)= X B Y B,where X B and Y B are her consumptions of goods X and Y.Abduls initial endowment is no units of Y and 7 units of X.Babettes initial endowment is no units of X and 6 units of Y.If X is the numeraire good and p is the price of good Y,then supply will equal demand in the market for Y if

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Question 3

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Mutt's utility function is U(m,j)=max{3m,j} and Jeff's utility function is U(m,j)= 3m + j.Mutt is initially endowed with 6 units of milk and 2 units of juice and Jeff is initially endowed with 2 units of milk and 6 units of juice.If we draw an Edgeworth box with milk on the horizontal axis and juice on the vertical axis and if we measure goods for Mutt by the distance from the lower left corner of the box,then the set of Pareto optimal allocations includes the

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Question 4

Xavier and Yvette are the only two persons on a desert island.There are only two goods,nuts and berries.Xavier's utility function is U(N_x,B_x)=N_xB_x.Yvette's utility function is U(N_y,B_y)+5N_y =B_y.Xavier is endowed with 4 units of berries and 13 units of nuts.Yvette is endowed with 6 units of berries and 8 units of nuts.In a competitive equilibrium for this economy,how many units of berries does Xavier consume?

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Question 5

In a pure exchange economy,Ollie's utility function is U(x,y)= 3x +y and Fawn's utility function is U(x,y)=xy.Ollie's initial allocation is 1 x and no y's.Fawn's initial allocation is no x's and 2 y's.Draw an Edgeworth box for Fawn and Ollie.Put x on the horizontal axis and y on the vertical axis.Measure goods for Ollie from the lower left and goods for Fawn from the upper right.Mark the initial allocation with the letter W.The locus of Pareto optimal points consists of two line segments.Describe these line segments in words or formulas and show them on your graph.

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Question 6

Morris has the utility function U(b,w)= 4b+16w and Philip has the utility function U(b,w)F= bw,where b is the number of books consumed per month and w is bottles of wine consumed per month.If we draw an Edgeworth box with books on the horizontal axis and wine on the vertical axis and if we measure Morris's consumptions from the lower left corner of the box,then the contract curve contains

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Question 7

Dan and Marilyn consume two goods,x and y.They have identical Cobb-Douglas utility functions.Initially Dan owns 10 units of x and 10 units of y.Initially Marilyn owns 40 units of x and 20 units of y.They make exchanges to reach a Pareto optimal allocation which is better for both than the no-trade allocation.Which of the following is not necessarily true about the allocation they trade to?

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Question 8

In a two-person,two-good,exchange economy,both consumers have quasilinear utility functions,linear in good 2.If quantities of good 1 are measured horizontally and quantities of good 2 are measured vertically in the Edgeworth box,the set of Pareto optimal allocations includes

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Question 9

According to the first theorem of welfare economics:

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Question 10

Tamara and Julio consume only bread and wine.They trade only with each other and there is no production.They both have strictly convex preferences.Tamara's initial endowment of bread and wine is the same as Julio's.

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Question 11

If the initial endowment is on the contract curve,then there must always be a competitive equilibrium in which no trade takes place.

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Question 12

A small economy has only two consumers,Nick and Minnie.Nick's utility function is U(x,y)= x +154y^1/2.Minnie's utility function is U(x,y)= x +7y.At a Pareto optimal allocation in which both individuals consume some of each good,how much y does Nick consume?

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Question 13

Kens utility function is U(Q K,W K)= Q K W K and Barbies utility function is U(Q B,W B)= Q B W B.If Kens initial endowment were 5 units of quiche and 9 units of wine and Barbies endowment were 10 units of quiche and 9 units of wine,then at any Pareto optimal allocation where both persons consumed some of each good,

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Question 14

If two people have identical homothetic preferences and if their indifference curves have a diminishing marginal rate of substitution,then in an Edgeworth box,the locus of Pareto optimal allocations between them is a diagonal straight line.

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Question 15

A situation is Pareto efficient if

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Question 16

If an allocation is Pareto optimal and if indifference curves between the two goods have no kinks,then

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Question 17

Morris has the utility function U(b,w)=3b + 3w and Philip has the utility function U(b,w)= bw,where b is the number of books consumed per month and w is bottles of wine consumed per month.If we draw an Edgeworth box with books on the horizontal axis and wine on the vertical axis and if we measure Morris's consumptions from the lower left corner of the box,then the contract curve contains

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Question 18

Xavier and Yvette are the only two persons on a desert island.There are only two goods,nuts and berries.Xavier's utility function is U(N_x,B_x)=N_xB_x.Yvette's utility function is U(N_y,B_y)=2N_y + B_y.Xavier is endowed with 3 units of berries and 8 units of nuts.Yvette is endowed with 6 units of berries and 8 units of nuts.In a competitive equilibrium for this economy,how many units of berries does Xavier consume?

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Question 19

In a pure exchange economy with two persons and two goods,one person always prefers more to less of both goods and one person likes one of the goods and hates the other so much that she would have to be paid to consume it.Both are initially endowed with positive amounts of both goods.The competitive equilibrium price of the good that one person hates

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Question 20

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Exam 32:Exchange-Part A

In a two-person,two-good,exchange economy,both consumers have quasilinear utility functions,linear in good 2.If quantities of good 1 are measured horizontally and quantities of good 2 are measured vertically in the Edgeworth box,the set of Pareto optimal allocations includes

According to the first theorem of welfare economics:

Tamara and Julio consume only bread and wine.They trade only with each other and there is no production.They both have strictly convex preferences.Tamara's initial endowment of bread and wine is the same as Julio's.

If the initial endowment is on the contract curve,then there must always be a competitive equilibrium in which no trade takes place.

A small economy has only two consumers,Nick and Minnie.Nick's utility function is U(x,y)= x +154y1/2.Minnie's utility function is U(x,y)= x +7y.At a Pareto optimal allocation in which both individuals consume some of each good,how much y does Nick consume?

If two people have identical homothetic preferences and if their indifference curves have a diminishing marginal rate of substitution,then in an Edgeworth box,the locus of Pareto optimal allocations between them is a diagonal straight line.

A situation is Pareto efficient if

If an allocation is Pareto optimal and if indifference curves between the two goods have no kinks,then

Demand-Part A

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-Part A

Exchange-Part B

Production-Part A

Production-Part B

Welfare-Part A

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

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A small economy has only two consumers,Nick and Minnie.Nick's utility function is U(x,y)= x +154y^1/2.Minnie's utility function is U(x,y)= x +7y.At a Pareto optimal allocation in which both individuals consume some of each good,how much y does Nick consume?