Homework 1 Answer Key

Homework 1 Answer Key - Economics 1480 Answer key #1 1)...

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Economics 1480 Answer key #1 1) Rosen Chapter 3: problem 4 a. Point A is the initial allocation. b. Given the initial allocation in the Edgeworth Box above, one can see that both Angelo and Bahn can reach a higher indifference curve at point B by trading tickets and other goods without either person being worse off. Therefore, the current allocation is inefficient. c. A situation in which the original allocation is efficient and the no trading does not affect efficiency is shown below at point A. Other goods Other goods Tickets Tickets Angelo Bahn A Other goods Other goods Tickets Tickets Angelo Bahn A B
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2) Rosen Chapter 3: problem 6 a. Social indifference curves are straight lines with slope of –1. As far as society is concerned, the “util” to Augustus is equivalent to the “util” to Livia. b. Social indifference curves are straight lines with slope of –2. This reflects the fact that society values a “util” to Augustus twice as much as a “util” to
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3) Consider the pure exchange economy discussed in class. There are two
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This note was uploaded on 07/22/2010 for the course ECON 1480 taught by Professor Knight during the Spring '10 term at Brown.

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Homework 1 Answer Key - Economics 1480 Answer key #1 1)...

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