# HW3_302 - Econ 302- Third Problem Set Spring 2011-Ali...

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Econ 302- Third Problem Set Spring 2011-Ali Toossi Due: Wednesday, February 16 (at the beginning of the class) All problem sets should be prepared neatly and professionally. Problem sets should be stapled and should contain the following information on the right-hand corner of the page: your name , your section , homework number and date . Problem sets that are sloppy, torn from spiral-bound notebooks, or which are illegible, or unstapled, will be graded down. Efficiency: 1. An economy contains two people and two goods, apples and bananas. Person 1 likes apples and dislikes bananas (the more bananas she has, the worse off she is), and person 2 likes bananas and dislikes apples. There are 100 apples and 100 bananas available. What is the Pareto efficient allocation? 2. An economy contains two people and two goods, apples and bananas. Both people like both goods, but value them differently. For person 1, 1 apple is exactly equivalent to 2 bananas: she is indifferent between any bundles ( a , b ) and ( a n , b + 2 n ), where a is some number of apples, b is some number of bananas, and n is some number). For person 2, 2 apples are exactly equivalent to 1 banana. There are 100 apples and 100 bananas. Which of the following allocations are Pareto efficient a. person 1 has 25 apples and 50 bananas and person 2 has 75 apples and 50 bananas. b. person 1 has all the apples and person 2 has all the bananas

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## This note was uploaded on 02/27/2011 for the course ECON 302 taught by Professor Avrin-rad during the Spring '09 term at University of Illinois, Urbana Champaign.

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HW3_302 - Econ 302- Third Problem Set Spring 2011-Ali...

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