2AMidtermAnswerKey

2AMidtermAnswerKey - FORM A Economics 113 UCSD Spring 2011...

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Unformatted text preview: FORM A Economics 113 UCSD Spring 2011 Prof. R. Starr, Ms. Stephanie Fried Midterm Exam FORM A1 Form A Answer Key 1 Consider the following (completely conventional) definition: { p ,x i ,y j } , p R N + , i H , j F , is said to be a competitive equilibrium if (i) y j Y j and p y j p y for all y Y j , for all j F , (ii) x i X i , p x i M i ( p ) = p r i + j F ij p y j and x i followsequal i x (equivalently, u i ( x i ) u i ( x ) ) for all x X i with p x M i ( p ) for all i H , and (iii) i H x i- j F y j- i H r i with p k = 0 for coordinates k so that the strict inequality holds. 1. The concept of competitive equilibrium is supposed to reflect decentralization of economic behavior. Explain how this definition embodies the concept of decentralization. 2. The concept of competitive equilibrium is supposed to reflect profit maximization by firms....
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This note was uploaded on 11/30/2011 for the course ECON 311 taught by Professor Zambrano during the Fall '08 term at Cal Poly.

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2AMidtermAnswerKey - FORM A Economics 113 UCSD Spring 2011...

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