Quiz3W10

# Quiz3W10 - I in Logeta CA Right next to it an engineering...

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Econ 100B Winter 2010 Quiz 3 Kevin’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 ) = 2 ln( x 1 ) + ln( x 2 ) and U B ( x 1 ,x 2 ) = ln( x 1 ) + 2 ln( 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 A ’s coordinates). x A 2 = 2. A private university produces and sells ideas (
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Unformatted text preview: I ) in Logeta, CA. Right next to it an engineering company produces gadgets ( G ). They act as competitive ﬁrms, with the university taking the price of p I = 2 and the engineers taking the price p G = 3. The respective cost functions of the ﬁrms are c I ( I ) = I 2 / 4 and c G ( G,I ) = G 2 / 8-I . If each ﬁrm operates independently, will the market provide too many or too few ideas? You will only be given credit for a correct answer if you write down expressions showing how the marginal private cost of I diﬀers from the the marginal social cost. Too many ideas Too few ideas (circle one) MPC I = and MSC I =...
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