To ascertain: A point onthe production possibility frontier for X − 2 Y is inefficient.

Question

Want to see the full answer?

Answer 1

Question

Chapter 10.4, Problem 2MQ

To determine

To ascertain: A point onthe production possibility frontier for X−2Y is inefficient.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Students have asked these similar questions

As an economics student your budget for meals at the university is Rs 12,000 and you have two options during the course of you studies: (i) Eating at the university cafeteria for Rs 40 per meal(ii) Eating at the dining hall for Rs 10 per meal. A) Draw the budget constraint showing the trade-off between cafeteria and dinning hall meals, with cafeteria meals on x-axis and dining hall meals on y-axis. Assume you spend equal amounts on both goods, draw an indifference curve showing the optimum choice. Label the optimum as point A. (2 Mark)

Assume that, a consumer has $1200 to spend on two goods, X and Y. If the price of a pair of good X is $20 per unit and the price of good Y is $15 each, which of the following combinations that the consumer can purchase from good X and Good Y?

Problem 1: Suppose that in an economy there are two goods, food, F, and clothing, C, and two consumers, Anne and Bob. Anne and Bob both have the same utility function U(F,C) = FC. The marginal rate of substitution of food for clothing associated with this utility function is MRSF.C = Firms in this economy have produced 10 units of food and 10 units of clothing. Explain why an allocation where Anne gets all the food and Bob gets all the clothing does not satisfy exchange efficiency. Explain why this allocation would never happen if Anne and Bob both have to pay the market prices for food and clothing and both make optimal choices. Hints: 1: Use the definition of exchange efficiency from the class slides or textbook. 2: Optimal choices must solve MRS=price ratio.