Unformatted text preview: b) Find his optimal allocation when he can not trade to the rest of the world. c) At what relative prices this optimum can be supported as a competitive equilibrium? d) Now suppose that there is possibility for trade, and Robinson can trade fish and coconuts at a price ratio P F /P C =2/1. If he keeps the same production decision as part (b) what will be his consumption, given the possibility of trade? e) Find the new optimal production decision with trade. 3) Consider an exchange economy with two consumers (A and B) and two goods (X and Y). The initial endowments for both consumers are ( ) ( ) ( ) ( ) 15 , 20 , and 10 , 80 , = = B B A A Y X Y X . They have the following utility functions: B B B A A A Y X U LnY LnX U = + = a) Find each consumers demand function b) Find the marketclearing price ratio. c) Find the contract curve....
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 Spring '08
 cunningham
 Economics, Microeconomics, Market Equilibrium, Supply And Demand, Robinson Crusoe, relative prices equilibrium

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