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Unformatted text preview: Take-Home Final ODD-ODD-ODD Answer Key 1 Take-Home Final Exam ODD-ODD-ODD Answer Key This exam is take-home, open-book, open-notes. You may consult any published source (cite your references). Other people are closed. The exam you turn in should be your own personal work. Do not discuss with classmates, friends, professors (except with Prof. Starr or Ms. Fried who promise to be clueless), until the examination is collected. Please use a blue book. There are four questions. Answer all questions fully. State clearly any additional assumptions you need. 1 Consider a two-person pure exchange economy (Edgeworth Box) made up of the following two households. The notation min[ xy, 16] means the minimum of xy and 16. Superscripts denote the household name nothing in this problem is raised to a power. Household 1 Household 2 Endowment r 1 = (1 , 9) r 2 = (9 , 1) Utility Function u 1 ( x, y ) = xy u 2 ( x, y ) = min[ xy, 16] 1. Household 2 does not fulfill C.IV. Household 2 has a maximum utility of 16; whenever household 2s holdings of x and y fulfill xy > 16, household 2 gets no additional satisfaction from additional consumption. Adopt the notation:no additional satisfaction from additional consumption....
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- Fall '08