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Page 1 of 4 This assignment is similar to Homework 2, but it extends the analysis to 4 people and 3 goods. Each individual producer still chooses the production, at the given prices, that maximizes revenue subject to the PPF. Since this is an extra credit assignment, it should be obvious that all work must be shown to receive any credit. You should attach your work to this assignment. Good 1 Good 2 Good 3 Ricky 15 6 12 Steve 20 30 40 Tyler 10 15 25 Urie 12 9 30 This chart should be read the same as the 2x2 case. For example, if Ricky spends all day making Good 1, he can make 15 units of Good 1 (and 0 units of Goods 2 and 3). If he instead spends a little bit of time making Good 2, then by the necessity of tradeoffs he must make a little bit less Good 1. 1. If P1 = 10, P2 = 5, and P3 = 8, how much do Ricky, Steve, Tyler, and Uriel (and hence society) produce? Write their productions as (Good 1, Good 2, Good 3). Ricky: Steve: Tyler: Uriel: Society: hp f7 144 DDI $12 prt sc % &Page 2 2. If P1 = 1, P2 = 8, and P3 = 3, how much do Ricky, Steve, Tyler, and Uriel (and hence society) produce? Write their productions as (Good 1, Good 2, Good 3). Ricky: Steve: Tyler: Uriel: Society: 3. At what price ratio (P1/P2) will Ricky be indifferent between producing Good 1 and Good 2? 4. What else must be true about P3, given your answer to the previous question, if Ricky were to produce some non-zero combination of Good 1 and Good 2? There are two separate requirements on P3 here. 5. At what price ratio (P1/P2) will Steve be indifferent between producing Good 1 and Good 2? hpPage 2 of 4 6. What else must be true about P3, given your answer to the previous question, if Steve were to produce some non-zero combination of Good 1 and Good 2? There are two separate requirements on P3 here. 7. At what price ratio (P1/P2) will Tyler be indifferent between producing Good 1 and Good 2? 8. What else must be true about P3, given your answer to the previous question, if Tyler were to produce some non-zero combination of Good 1 and Good 2? There are two separate requirements on P here. 19 144 f10 DDI $12 insPage 3 of 4 9. At what price ratio (P1/P2) will Uriel be indifferent between producing Good 1 and Good 2? 10. What else must be true about P3, given your answer to the previous question, if Uriel were to produce some non-zero combination of Good 1 and Good 2? There are two separate requirements on P3 here. 11. If P1 = 2, P2 = 5, and P3 = 1, how much do Ricky, Steve, Tyler, and Uriel (and hence society) produce? Write their productions as (Good 1, Good 2, Good 3). Ricky: Steve: Tyler: Uriel: Society: hp12. Say P2 = 11 and P3 = 8. What is the range of values of P, that would induce all players to make all Good 1? 13. Say P2 = 3 and P3 = 5. What is the range of values of P, that would induce all players to make all Good 1? hp f12 ins prt sc f9 f10 f7 f8 144 DII DDI 16 &
