In an exchange economy A's utility is given by UA = x + y and B's by UB = min[x, 2y]. The initial endowment for A is x = 10, y = 8 and for B, x = 8, y = 4 . To reach the contact curve, these individuals must:
a. trade 1x for 1y.
b. trade 2x for 1y.
c. trade 1x for 2y.
d. do nothing, since they are already on the contract curve.
d
You might also like to view...
What is the difference between an "increase in demand" and an "increase in quantity demanded"?
A) An "increase in demand" is represented by a movement along a given demand curve, while an "increase in quantity demanded" is represented by a rightward shift of the demand curve. B) There is no difference between the two terms; they both refer to a movement downward along a given demand curve. C) An "increase in demand" is represented by a rightward shift of the demand curve while an "increase in quantity demanded" is represented by a movement along a given demand curve. D) There is no difference between the two terms; they both refer to a shift of the demand curve.
A cut in the income tax rate designed to encourage household consumption is an example of:
(a) Expansionary demand-side policy; (b) Contractionary demand-side policy; (c) Expansionary supply-side policy; (d) Contractionary supply-side policy.
From the Industrial Revolution to the present, innovation has played a major role in the growth of output. What do the leading analysts of economic growth argue were some of the most significant innovations of this period?
What will be an ideal response?
The Dodd-Frank Act attempts to prevent future financial crises by making major changes to the U.S. financial system, including
A. paying banks interest on their reserve holdings. B. increasing banks' reserve requirements. C. reducing the interest rates banks can charge their customers for loans. D. requiring the Federal Reserve to stress test banks' capital.