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Quiz3S10-2

# Quiz3S10-2 - A ’s coordinates x A 2 = 2 The Santa Barbara...

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Econ 100B Spring 2010 Quiz 3 Cameron’s Sections You have 15 minutes to take this quiz. Please answer each question in space provided. You are encouraged to show your work. Your score for each question will simply be 1 if your answer is correct and 0 if it is not correct. 1. Consider an exchange economy with two goods, 1 and 2, and two consumers, A and B . The consumers are initially endowed with a total of unit of each good, i.e. ω 1 = ω A 1 + ω B 1 = 1 and ω 2 = ω A 2 + ω B 2 = 1. Their preferences are represented by U A ( x 1 , x 2 ) = x 1 x 2 2 and U B ( x 1 , x 2 ) = x 2 1 x 2 . (For brevity, I left out the superscript A ’s and B ’s above.) Write the equation of the contract curve (in terms of
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Unformatted text preview: A ’s coordinates). x A 2 = 2. The Santa Barbara Bowl (SBB) holds outdoor music events ( M ), earning \$3 of revenue from each concert and with total costs of c M ( M ) = M 2 / 8 for M concerts. Ursula is a writer who lives right next to the SBB and who sells her novels on the competitive market at the price of p N = 2. The music that Ursula overhears from the SBB distracts and it costs her c N ( N,M ) = N 2 / 4+ M to write N novels. What is the socially optimal number of concerts for the SBB to hold?...
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