Scenario 1: Assume an economy that produces two goods Y and X such that the production function of Y is given by: Y= 2L and the production function of X is given by : X = 4L; Total labor in the economy is L= 50 . Assume a representative consumer has the following utility function: U = XY.

PX= $45; PY= $90; MRX= $22.5; and MRY= $45. Note when firms operate under competition,

w= MPL. (Price of output), when firms operate under monopoly, w= MPL. (MR of output). Assume L is mobile.

17) Refer to Scenario 1. Assume both Y and X are produced under competition, then Lx = ______; and Ly= ______.

18) Refer to Scenario 1. Assume both Y and X are produced under competition, then X= ______; and Y= ______.

19) Refer to Scenario 1. If only X is monopolized, & if producers maximize profits and consumers maximize utility, then Lx = ______; and Ly= ______.

20) Refer to Scenario 1. If only X is monopolized, ...; then X= ______; and Y = ______.

21) Refer to Scenario 1. If only Y is monopolized, & if producers maximize profits and consumers maximize utility, then Lx = ______; and Ly= ______.

22) Refer to Scenario 1. If only Y is monopolized, & if producers maximize profits and consumers maximize utility, then X = ______; and Y = ______.

23) Refer to Scenario 1. If both Y and X are monopolized, then Lx = ______; and Ly= ______. (Assume the wage is still at its level when both Y & X were produced under competition.)

24) Refer to Scenario 1. If both Y and X are monopolized, ......; then X = ______; and Y= ______.

25) Refer to Scenario 1. If both Y and x are monopolized....; then the wage w = $ ______.

26) Refer to Scenario 1. If both Y and X are monopolized....; where is the economy regarding its PPF?

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