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PS12+exercises

# PS12+exercises - allocations x = q;q;±;m in which the...

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Intermediate Microeconomics, 2010 Problem Set 12: Exercises 1. Consider the following quasilinear economy: U ( m;q ) = m + ± 15 q ± 1 2 q 2 ² c ( q ) = q 2 and Y = 100 (recall, negative consumption of m is allowed). (a) Find the competitive allocation: x ± = [ q ± ;q ± ± ;m ± ]. (b) Find the surplus S ( q ± ) at the competitive allocation. (c) Argue that allocations in which q 6 = q ± cannot be e±cient. Take some concrete
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Unformatted text preview: allocations x = [ q ;q ;± ;m ] in which the quantity q is larger than q ± (say, q = 10) and some concrete allocation in which q is smaller than q ± (say, q = 1). Calculate the surplus for each allocation. Show how you can make the consumer better o² without making the ³rm worse o². 1...
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