310-2-final - Economics 310-2 Spring 2007 Professor Jeff...

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Unformatted text preview: Economics 310-2 Spring 2007 Professor Jeff Ely Final Exam Instructions: There are three questions with equal weight. You have 2 hours to complete the exam. Please remember that your explanations are at least as important as the answers you give. Explain your answers carefully. 1. This question is about a two-person pure-exchange economy. There are two goods, G and B and consumers 1 and 2 have endowments ( e G 1 ,e B 1 ) and ( e G 2 ,e B 2 ) respectively, where e G i and e B i indicate the quantities of G and B initially held by consumer i . (a) Define a feasible allocation. (b) State precisely what it means for a feasible allocation to be Pareto efficient. (c) Assume that both consumers preferences have the following property: good B is in fact a bad in that more of good B lowers the consumers utility. (Units of B cannot be simply disposed of, they inevitably lower to utility of whomever obtains them.) Good G on the other hand is a traditional good in that more of good G raises the consumers utility. Do you agree or disagree with the followingraises the consumers utility....
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310-2-final - Economics 310-2 Spring 2007 Professor Jeff...

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