problem set 2

# Problem set 2 - Econ 102B Summer Session II 2008 Problem Set 2(Due Wednesday August 13th 1 Consider an economy with one producer and one consumer

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Econ 102B, Summer Session II, 2008 Problem Set 2 (Due Wednesday, August 13 th ) 1. Consider an economy with one producer and one consumer. There are two goods: food (F) and labor (L). The production function is given by F p =3L p , and the consumer’s marginal rate of substitution of labor for food is given by MRS LF = F c / (24-L c ) [Note: Subscript p stands for commodities produced or used in production, and subscript c denotes commodities consumed or provided by the consumer]. The aggregate initial endowment bundle in this economy is (0, 0). Compute the competitive equilibrium for this economy [Think carefully: What is the budget constraint of the consumer and what are the attainability conditions for each commodity?]. 2. Consider a two-person pure exchange economy with two goods, A and B, and two consumers, 1 and 2. 1’s utility function is given by u=u(A 1 , B 1 ) and 2’s utility function is given by v=v(A 2 , B 2 ). The initial endowment bundles of 1 and 2 are given by (A 1 , B

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## This note was uploaded on 07/06/2009 for the course ECON 102b taught by Professor Ozan during the Summer '08 term at UC Riverside.

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Problem set 2 - Econ 102B Summer Session II 2008 Problem Set 2(Due Wednesday August 13th 1 Consider an economy with one producer and one consumer

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