HW3 - Homework Assignment 3 Econ 382, Professor Platt, BYU...

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Unformatted text preview: Homework Assignment 3 Econ 382, Professor Platt, BYU Due in class, January 28th, 2009 1 Warmup Optional questions. Points earned in this section can offset points lost elsewhere (though the maximum score for the assignment is still 100 points). Credit is only given if you show all steps taken to obtain your answer. 1. Alex (from HW Question 1.1) has just learned about Pareto efficiency, and wants to apply the concept in relation to his cereal/noodle trades with Bob. Suppose Alex has a utility function U A ( c a ,n a ) = c . 75 a n . 25 a , and Bobs utility function U B ( c b ,n b ) = c . 5 b n . 5 b . Alex has 12 boxes of cereal and 20 packs of noodles, while Bob has 6 boxes of cereal and 10 packs of noodles (a) (5 pts) Define a Pareto optimal allocation for this economy. (b) (10 pts) Find all Pareto efficient allocations for the economy. Describe these mathematically and sketch them as a contract curve in an Edgeworth box....
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HW3 - Homework Assignment 3 Econ 382, Professor Platt, BYU...

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