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# Answer to Question #51180 in Microeconomics for zem

Question #51180
An economy comprises two consumers, 1 and 2, with two consumption goods bi-cycles (b) and
wheat(w). Both consumers have the same utility function μ (b,w)=bw
Bi-cyclesandwheat are produced by two firms which use only labour according to the production functions
b =1b and w=0.5/1w
\$!l%
Both firms are owned by consumer 1, and consumer 2 owns 200 units of labour.
(a) Find the production possibility frontier for this economy.
(b) Find the competitive equilibrium.
(c) Find competitive equilibrium if every consumer owns 100 units of labour and owns one
firm.
(d) Find the Pareto efficient allocations for this economy.
1
2015-09-23T11:04:39-0400
1. (a) A production&ndash;possibility frontier (PPF) is a graph representing production tradeoffs of an economy given fixed resources. The graph
shows the various combinations of amounts of two commodities that an
economy can produce (e.g., number of guns vs kilos of butter) using a
fixed amount of each of the factors of production. Graphically bounding
the production set for fixed input quantities, the PPF curve shows the
maximum possible production level of one commodity for any given
production level of the other, given the existing state of technology.
(b) In this case, the competitive equilibrium can't be found, as there is not enough data.
(c) If every consumer owns 100 units of labour and owns one firm, the competitive equilibrium will change.
(d) We can't find the Pareto efficient allocations for this economy, because there is not enough data.

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Assignment Expert
23.09.15, 18:04

Dear Deepak, We can't find the Pareto efficient allocations for this economy, because there is not enough data.

Deepak
23.09.15, 10:20

what do u mean by can't