Eve who has the utility ??(??,??)=??2?? and Adam who has the utility ??(??,??)=??2??. Let ??denote the...

Eve who has the utility ??(??,??)=??2?? and Adam who has the utility ??(??,??)=??2??. Let ??denote the food and ?? denote the housing that Eve consumes. ?? and ?? are analogously defined.

a) Suppose that Eve has an endowment of 20 units of housing and 20 units of food; and, Adam has and endowment of 20 units of housing and 20 units of food. Find an equation for Eve’s MRS (MRSe) and her MRSe at her endowment. Find an equation for Adam’s MRS (MRSa) and his MRSa at his endowment.

b) Using an Edgeworth Box with Eve’s origin in the lower left corner and her consumption of food on the horizontal axis, illustrate Adam’s and Eve’s endowments and roughly draw their indifference curves that go through their endowments.

c) Explain why both Adam and Eve could be better off by trading with each other versus simply consuming their own endowments. Give an example of a trade that would lead to each being better off than if they just consumed their endowments of the two goods. Support your answer with a comparison of utility levels for each before and after the trade.

d) Set up and solve Eve’s utility maximization problem where her income is denoted by ??. Do the same for Adam where his income is ??. Let ?? and ?ℎdenote the prices of food and housing. Solve for the utility maximizing quantities of food and housing for both.

e) Let ??=2 and ?ℎ=4. Imagine that Adam and Eve sell their endowments at the market prices to generate income and then use that money to purchase the amount of food and housing that makes them happiest. Using you answers from part d) determine who much each would like to purchase at these prices. Given you answers, can you determine whether these prices are equilibrium prices? Support your answer in no more than two sentences.

Expert Solution

Rahul Sunny answered 1 year ago

In popular imagination, Eve is often depicted as a seductress who tempted Adam and drew him...

In popular imagination, Eve is often depicted as a seductress who tempted Adam and drew him away from God and toward evil. The image of woman, in other words, is often fused with the image of the serpent, and humanity's woes are her responsibility. How does this popular image of Eve compare with the actual depiction of Eve in Genesis 2-3?

what are the stories of Adam & Eve and Abraham & Sarah about in and of...

what are the stories of Adam & Eve and Abraham & Sarah about in and of themselves? What themes do the authors of the New Testament emphasize when discussing these stories? What does this tell us about the beliefs of the early Christians?

Adam and Eve are stranded on a desert island. There are only two goods on the...

Adam and Eve are stranded on a desert island. There are only two goods on the island: Apples (A) and Bananas (B). The utility functions of Adam and Eve are U^Adam(DA, DB) = (DA)^1/2 (DB)^1/2 and U^Eve(DA, DB) = (DA)^1/2 (DB)^1/2 respectively (they have the same preferences). Total endowments on the island are 20 Apples and 60 Bananas. Adam owns all the bananas and Eve all the apples. (a) Draw the Edgeworth box for this exchange economy, including Adam and...

The First family (Adam, Eve, Seth, Cain) have several risk exposures. Adam is a practicing attorney...

The First family (Adam, Eve, Seth, Cain) have several risk exposures. Adam is a practicing attorney with upper-middle income and positive net worth. Cain is 20 years old, and Seth is 8 years old. Eve is a full-time homemaker. Identify each of the following as critical, important, or unimportant risks. a. Professional liability risk in Adam’s practice. b. Liability and property loss risks with Cain’s 15-year-old (low value) car. c. Disability for Eve. d. Risk of...

Let Rx denote the group of nonzero real numbers under multiplication and let R+ denote the...

Let Rx denote the group of nonzero real numbers under multiplication and let R+ denote the group of positive real numbers under multiplication. Let H be the subgroup {1, −1} of Rx. Prove that Rx ≈ R+ ⊕ H.

Will Smith consumes chocolate and milk. Let y denote chocolate and x denote milk. Chocolate has...

Will Smith consumes chocolate and milk. Let y denote chocolate and x denote milk. Chocolate has an unusual market where there is only one supplier, and the more chocolate you buy from the supplier, the higher the price she charges per unit. In fact, y units of chocolate will cost Will y2 dollars. Milk is sold in the usual way at a price of 2 dollars per unit. Will’s income is 20 dollars and his utility function is U =...

Adam and Eve live on two sides of the Garden of Eden, a small suburban development....

Adam and Eve live on two sides of the Garden of Eden, a small suburban development. After they move in, an old PCB dump is discovered in between their houses. If X total tons of PCB's are removed from the dump, the two have a true willingness to pay (WTP) to finance a clean-up equal to: ADAM's WTP = 10 - X EVE's WTP = 6 - X a. Adam's WTP is higher than Eve's. Does this necessarily imply that...

Consider an individual who purchases two goods. Let ? denote the quantity of good 1 that...

Consider an individual who purchases two goods. Let ? denote the quantity of good 1 that this person buys, and let ? denote the quantity of good 2 that this person buys. The income earned by this individual provides money in the amount ?=540 which this person can use to spend on these two goods. The price of good 1 is ?! = 5 and the price of good 2 is ?" = 5. This person’s happiness is determined by...

Let E(n) denote the expected return on asset i and B. denote the corresponding beta. In addition, let E(rm) denote the expected

Let E(n) denote the expected return on asset i and B. denote the corresponding beta. In addition, let E(rm) denote the expected return on the market portfolio and Bm denote the corresponding beta. Define and sketch the Security Market Line (SML). Hint: Use E(rm) - r = 8%, r = 3%, B. = 1.25 and B2 = 0.6.

Adam is an architect who has worked for Garfield=s company for the last six years. Adam...

Adam is an architect who has worked for Garfield=s company for the last six years. Adam earns $2,000.00 per week, but has a general bad working relationship with his employer, Garfield. Because of that bad relationship, Garfield has been awaiting an opportunity to terminate Adam. Last week Adam was thirty minutes late for work, three mornings in a row. That, and an error on a file that Adam made last week that cost his employer $4,000.00 resulted in Garfield firing...

Question