Question 20 An island community has two residents: Katie and Dylan. Katie has a utility function of Uk = (2W)+1,000. Dylan's utility function is represented by Up=4'W2. Here, W measures the wealth of each person. Assume Katie currently has $2, and Dylan has $4.
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- Zach's preferences are representable by the utility function u = 90.3927, where 9₁ and 92 denote his consumption of goods 1 and 2. (Answers to each of these questions are rounded, where required, to two decimal places.) Still assuming endowments of e₁ = 5 and e₂ = 9 and market prices p₁ = 20 and p2 = 30, what is the maximised value of Zach's utility? O Au= 6.74 O B. u = 5.39 O Cu = 5.65 O D.u = 7.56 O E. None of the above2. Alexandria and Bob can each choose to Work or Not Work on a task. Each person's output is £80 for Not Work, and £160 for Work. The cost of effort is £0 for Not Work and £70 for Work. The total output is shared equally between the two. For example, if Alexandria puts in her effort but Bob does not, her net income is £120 - £70 = £50. Assume both workers are completely selfish. Based on this information, determine whether each of the following statements is true or false. (a) In the equilibrium outcome, they both end up with a net income of £80 each. (b) In the situation where both Alexandria and Bob put in effort, Alexandria does not have an incentive to deviate. (c) If Bob chooses to Not Work, he will definitely end up with a net income of £120. (d) The equilibrium outcome is the socially optimal outcome (outcome that maximises sum of their payoffs).5. Gina and Bob are co-owners of a surf shop. Both Gina and Bob prefer to skip work and go surfing, but if they both surf, the shop is closed. Each co-owner must choose between working and surfing. If they both work, they earn $600 each. If both surf, they earn $200 each (the value they place on surfing). If only one of the co-owners surfs while the other works, the worker gets $800 and the surfer gets $1000. a. Suppose that Gina and Bob make their decision simultaneously. Depict their interaction on a payoff table showing all outcomes (payouts) payouts. Identify the equilibrium outcome(s). b. Now suppose that Gina is an early riser, whereas Bob sleeps in. Therefore, Gina decides first whether to work or surf. By the time Bob makes his decision, Gina has already committed to one of the two options. Depict this interaction in a sequential game tree. Show all the payouts and identify the equilibrium outcome(s). c. Would it be in Bob’s best interest to get up sooner, so that he can…
- 2. Suppose there are only two people, Simon and Charity, who must split a fixed income of $100. For Simon, the marginal utility of income is MU, = 400 - 21, whereas for Charity, marginal utility is MU= 400 - 61 where I, I, are the amounts of income to Charity and Simon, respectively. a. What is the optimal distribution of income if the social welfare function is additive? b. What is the optimal distribution if society val- ues only the utility of Charity? What if the reverse is true? Comment on your answers. c. Finally, comment on how your answers change if the marginal utility of income for both Simon and Charity is constant: MU₂ = 400 MU, = 4001) John is operating an internation business in the United Stateds of American and is focused on the limitation or short-term impact of an issue. It can be said that John has a ............. 2) The grestest good for the greatest number of persons is known as the ............... approach. 3) this theorgy states that a country's wealth was deternmined by the amount of its gold and silver holding. It is ...........?Allison has a golden goose that will lay an egg every year until forever. The first egg will be out next year, and each egg is worth $500. Allison's friend, Eric, offers a price to buy the golden goose from Allison today. The interest rate is 10%. From the cost-benefit analysis, under which of the following offers would Allison be willing to sell the goose to Eric? O A $4,500 B. $5.500 C. Allison would want to sell it to Eric with both $4,500 and $5.500. D. Allison wouldn't want to sell it anyway since the eggs would be laid out forever.
- 1. Write down an exchange economy model with two individuals and two goods, in whichthere is no consumption externality. State and explain the key assumptions of the model.Using the model, answer the following questions:(a) Explain carefully how the concept of Pareto efficiency differs from that of socialwelfare.(b) State the Second Theorem of Welfare Economics and explain carefully why it holds.What is the importance of the assumption of convex preferences to this theorem?Question 1 In the figure shown below, which of the following is true? PERSON is_married to O A person can marry at most one person. O A person has to be married. O A person can marry more than one person. All answers are incorrect O A person can marry more than one person, but that person can only be married to one person.2. A society has to decide between allocating a sum of money I between the current generation (A) and the future generation (B). Total social welfare is determined according to a simple utilitarian aggregation of both generations' utilities. The utility of generation B 1 has to be discounted in order to be considered. The discount factor is (1+i)" where i is the prevailing interest rate and n is the number of years in the future in which generation B will be born. If both generations have the same utility function log (I) (where x=A or B), find out the division of income between the generations for the following combinations of the interest rate and n: i. n 1 year and i = 5%. ii. n=1 year and i = 10%. iii. n = 2 year and i = 5%. iv. n 2 year and i = 7%. v. n 10 years and i = 0%. =
- 2. Suppose you have no money of your own but luckily you participate in one contest. You have a utility for money as follows. U=y". You two options: Option 1: You get X liras for sure. Option 2: You get 144 liras 50 percent of the time and nothing 50 perctt of the time. a-) How much X should be in order for you to be indifferent between option 1 and option 2? Please show all your calculations b-) What is your Arrow-Pratt measure of absolute risk aversion? How does it change with y?Whether a certain criterion is determinant or not is independent of the situation in which a product is consumed. True False In the context of disposing of consumer refuse, recycling cuts down on garbage while providing raw materials for other new products. True False Which of the following is a fundamental emotion evoked by positive, anticipatory appraisals that signal uncertainty about a positive outcome? a. Hope b. Confusion c. Surprise d. Pride Which of the following best describes chronic, repetitive purchasing behaviors that are in response to negative events or feelings? a. Addictive consumption b. Impulsive purchasing c. Window shopping d. Compulsive buying Retaliatory revenge is when a consumer yells insults and makes a public scene in an effort to harm the business. True False2. Residents in a town are voting to decide where a new library will be built. The residents" homes are on the same street and the "map" of the town is represented below. The letters represent the location of each house. The numbers represent distance in 100 meters (in other words, house 'a' is 100 meters from house 'b' and 1200 meters from house i). Each house- hold would receive a utility of 12 if the library was built in front of that house; utility decreases by I unit as the distance to the library increases by 100 meters. Use the distance markers (the numbers) to indicate where the library should go according to the following aggregation methods:
