Author Question: In an exchange economy A's utility is given by UA = x + y and B's by UB = minx, 2y. The initial ... (Read 34 times)

2125004343 · **on:** Jul 1, 2018

In an exchange economy A's utility is given by UA = x + y and B's by UB = minx, 2y. The initial endowment for A is x = 10, y = 8 and for B, x = 8, y = 4 . To reach the contact curve, these individuals must:
a. trade 1x for 1y.
b. trade 2x for 1y.
c. trade 1x for 2y.
d. do nothing, since they are already on the contract curve.

Question 2

Which of the following is (are) a basic principle(s) when estimating a project's cash flows?
a. cash flows should be measured on a pre-tax basis
b. cash flows should ignore depreciation since it is a non-cash charge
c. only direct effects of a project should be included in the cash flow calculations
d. cash flows should be measured on an incremental basis
e. all of the above