practicequestionand solution

practicequestionand solution - Language American English...

Info iconThis preview shows pages 1–7. Sign up to view the full content.

View Full Document Right Arrow Icon
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Background image of page 2
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Background image of page 4
Background image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Background image of page 6
Background image of page 7
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: Language American English Economics 302: Intermediate Microeconomics II Practice Questions 1. Consider a pure exchange economy with two identical consumers with standard convex pref— erences. Consumer A has 10 units of good 1 and 4 units of good 2. Consumer B has 4 units of good 1 and 10 units of good 2. Would we expect trade to occurr in this economy? Explain. What if both consumers have 7 units of both goods, would we expect trade to arise? Explain. 2. In a Robinson Crusoe oneproduct economy there are two goods, coconuts and leisure. Suppose Robinson has symmetric convex preferences over the two goods leisure and coconuts. That is, a sketch of the indifference curves over leisure and coconuts would entail a slope that is equal to —1 on the 45" ray from the origin, steeper above this ray and flatter below this ray. Labour in this economy is simply the negative of leisure as far as preferences over labour and coconuts. Suppose a standard concave production function G = f Is it possible in this economy to have a competitive equilibrium in which wage rate is 3 times higher that the price of coconuts? Explain. 3. Now consider a twoeproduct two—person version of the Robinson Crusoe (and Friday) econ- omy. The two goods are fish and coconuts and each have the same technology: production functions for fish and coconuts are identical concave functions. Suppose also that the prefer— ences for Robinson Crusoe and Friday are identical and symmetric. (That is the slope of an indifference curve over fish and coconuts equals —1 on the 450 ray, is steeper above the ray and flatter below the ray.) Sketch these two production functions and provide a production possibilities frontier consistent with your production functions. Suppose there is a competitive equilibrium outcome in which the price of coconuts is equal to the price of fish. Show this competitive equilibrium on a graph making sure to demonstrate profit maximization in the economy, and utility maximization by the consumers. Can we have a competitive equilibrium in this economy with the price of coconuts 2 times the price of fish? Explain. 3,0be ‘ LUV-w db)“ fi “.1 M hare {{ng (Ix/Wt ...
View Full Document

This note was uploaded on 02/25/2010 for the course ECON 00000112 taught by Professor Ianirvine during the Spring '09 term at Concordia Canada.

Page1 / 7

practicequestionand solution - Language American English...

This preview shows document pages 1 - 7. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online