1/2 Consider a consumer with the utility function u (x1, x2) = x₁¹ + x2. Suppose the cost of producing good x1 is given by the cost function c(x1) and the price of good x2 is $1. Illustrate that the solution to the social planner's problem in terms of production of x1 is equivalent to the perfectly competitive market outcome.

Algebra for College Students
10th Edition
ISBN:9781285195780
Author:Jerome E. Kaufmann, Karen L. Schwitters
Publisher:Jerome E. Kaufmann, Karen L. Schwitters
Chapter12: Algebra Of Matrices
Section12.CR: Review Problem Set
Problem 37CR
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1/2
Consider a consumer with the utility function u (x1, x2) = x₁¹ + x2. Suppose the
cost of producing good x1 is given by the cost function c(x1) and the price of good
x2 is $1. Illustrate that the solution to the social planner's problem in terms of
production of x1 is equivalent to the perfectly competitive market outcome.
Transcribed Image Text:1/2 Consider a consumer with the utility function u (x1, x2) = x₁¹ + x2. Suppose the cost of producing good x1 is given by the cost function c(x1) and the price of good x2 is $1. Illustrate that the solution to the social planner's problem in terms of production of x1 is equivalent to the perfectly competitive market outcome.
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