Question

In: Economics

Terry will trade four pizzas for one six-pack of beer and beequally happy. At the...

Terry will trade four pizzas for one six-pack of beer and be equally happy. At the same time, Dean will gladly exchange two of his six-packs for six pizzas. Is the allocation of beer and pizza Pareto efficient? Explain and provide a diagram.

Solutions

Expert Solution

We know that according to the Edgeworth box, Pareto efficiency will be accomplished when indifference curve of Hamlet and Ophelia are tangent to one another anytime. That point ought to be Pareto efficient.

From the given scenario the Ideal utility determined by Hamlet and Ophelia are not tangent by then as both are expecting an different exchange rate of Pizzas with Beer.

Hamlet needs one six pack of brew for two pizzas yet Ophelia needs 6 pizzas for 2 six packs of beer or 3 pizzas for 1 six pack of beer. Hence tangent point isn't accomplished.

Rahul Sunny answered 2 years ago
Next > < Previous

Related Solutions

With an excise tax of $.50 per six-pack of beer a student purchases 12 six-packs per...
With an excise tax of $.50 per six-pack of beer a student purchases 12 six-packs per month. If the government requires the students to pay $6.00 per month as lump sum tax instead of imposing excise tax, how will the student’s consumption pattern and welfare be affected? Using a graph to explain your answer.
Australian bottle shops often sell beer in a pack of 6 or individually. Suppose an individual...
Australian bottle shops often sell beer in a pack of 6 or individually. Suppose an individual beer costs $6, but a six pack costs $30. Your friend has $210. a) Graphically illustrate how this pricing affects the your friend's budget set if the other good is $1. b) Assuming your friend has standard indifference curves, how many beers would you expect them to purchase?
Advertisements claim that Happy Joe's puts more pepperoni on its pizzas than competitors. In order to...
Advertisements claim that Happy Joe's puts more pepperoni on its pizzas than competitors. In order to investigate this claim, 9 medium pizzas from Happy Joe's and 9 medium pizzas from Pizza Hut are purchased at random times over a month long period. The number of slices of pepperoni on each pizza is then counted. At � = 0.10, can you support the claim? Happy Joe’s 25 20 21 24 23 24 26 25 21 Pizza Hut 18 22 18 19...
Advertisements claim that Happy Joe's puts more pepperoni on its pizzas than competitors. In order to...
Advertisements claim that Happy Joe's puts more pepperoni on its pizzas than competitors. In order to investigate this claim, 9 medium pizzas from Happy Joe's and 9 medium pizzas from Pizza Hut are purchased at random times over a month long period.  The number of slices of pepperoni on each pizza is then counted. At , can you support the claim? Perform the hypothesis test. Check Conditions State Work here Hypotheses State Work here Statistic State Work here Critical Value(s) State...
1. Basket A contains 1 beer and 5 pizzas. Basket B contains 5 beers and 1...
1. Basket A contains 1 beer and 5 pizzas. Basket B contains 5 beers and 1 pizza. Basket C contains 3 beers and 3 pizzas. Assume throughout that tastes are monotonic. On Monday, Bob is offered a choice between basket A and C, and he chooses A. On Tuesday he is offered a choice between basket B and C, and he chooses B. (c) Suppose that Bob’s preferences satisfy a weak convexity assumption (averages are at least as good as...
1. Basket A contains 1 beer and 5 pizzas. Basket B contains 5 beers and 1...
1. Basket A contains 1 beer and 5 pizzas. Basket B contains 5 beers and 1 pizza. Basket C contains 3 beers and 3 pizzas. Assume throughout that tastes are monotonic. On Monday, Bob is offered a choice between basket A and C, and he chooses A. On Tuesday he is offered a choice between basket B and C, and he chooses B. (c) Suppose that Bob’s preferences satisfy a weak convexity assumption (averages are at least as good as...
S2 Margin Analysis. If a six-pack of a fruit-soda sells for $6 retail and the retailer's...
S2 Margin Analysis. If a six-pack of a fruit-soda sells for $6 retail and the retailer's margin is 25% and the wholesaler-distributor margin is 33% then what is the manufacturer's price? 2- Price Setting Analysis. The Eco-spout entrepreneur wishes to pay himself and his son $25,000 each. He also plans $20,000 in extra fixed selling costs and a decrease in estimated variable sales costs from 10 cents down to five cents a unit. What is the new target share of...
Sudz Beer buys the necessary ingredients to brew and bottle one batch of beer for a...
Sudz Beer buys the necessary ingredients to brew and bottle one batch of beer for a total of $24,300. Each batch yields 75,960 bottles of beer. The cost per bottle is $0.32. They sell their beer to a distributor with a 35% markup, and then the distributor sells it to the retailer for a 41% markup. Because the retailer has a virtual monopoly on consumer sales, they get away with selling the beer at a 62% margin. What is the...
Suppose there are two beer companies. One produces a beer that has a high alcohol content...
Suppose there are two beer companies. One produces a beer that has a high alcohol content (ABV 10%), while the other company produces a light beer that has a low ABV (5%). Assume there are 50 consumers whose preferences for alcohol content (ABV) are uniformly distributed between 5% and 10%. Consumers all value drinking a beer their ideal beer at $10 but dislike a beer with a different ABV than their ideal ABV by $1 per percentage point. That is,...
In a population of 10,000, there are 5000 nonsmokers, 2500 smokers of one pack or less...
In a population of 10,000, there are 5000 nonsmokers, 2500 smokers of one pack or less per day, and 2500 smokers of more than one pack per day. During any month, there is a 5% probability that a nonsmoker will begin smoking a pack or less per day, and a 4% probability that a nonsmoker will begin smoking more than a pack per day. For smokers who smoke a pack or less per day, there is a 10% probability of...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT