Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

These questions are about Economic efficiency, can someone pls help? Thank you in advance! Consider an economy with two people, Donald and Melania, with two

These questions are about Economic efficiency, can someone pls help? Thank you in advance!

image text in transcribedimage text in transcribed
Consider an economy with two people, Donald and Melania, with two goods: yachts (denoted y) and condos (denoted c). There are 10 yachts and 20 condos in the economy. Both people have the same utility function, U'(y, c) = yl/3cl/3. (Assume the goods can be consumed in continuous measure, not just integers i.e., Donald can consume 0.01 yachts). 4. True or False: An allocation in which Donald has 10 yachts and 20 condos (and Melania has 0 of both) is Pareto efficient. (2 points) 5. True or False: An allocation where Donald has 10 yachts and 12 condos (and Melania has 0 yacht and 8 condos) is Pareto efficient. (2 points)6. Assume that the social welfare function is the sum of Donald and Melania's utility. If the social planner can choose the final allocation, how many yachts and condos when the planner allocate to Melania (giving Donald the rest) in order to maximize social welfare? (2 points) 7. True or False: The allocation that you found in the prior step (number 6), which maximizes the social welfare function, is the only Pareto efficient allocation. (2 points) 8. True or False: Moving from the allocation in number 5 to the welfare maximizing allocation in number 6 is a Pareto improvement. (2 points)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

The Great Convergence Information Technology And The New Globalization

Authors: Richard Baldwin

1st Edition

067466048X, 9780674660489

More Books

Students also viewed these Economics questions