This topic contains a solution. Click here to go to the answer
« previous next »

Author Question: Assume that two individuals, A and B, are willing to trade products X and Y. Before a possible ... (Read 30 times)

bobypop

  • Hero Member
  • *****
  • Posts: 539
on: Jul 1, 2018
Assume that two individuals, A and B, are willing to trade products X and Y. Before a possible trade, A has the following marginal rates of substitution of X for Y (or of Y for X): MRSXYA = 0.80 (or equivalently, MRSYXA = 1.25).
 
  Also, before a possible trade, B has these marginal rates of substitution of X for Y (or of Y for X): MRSXYB = 1.50 (or equivalently, MRSYXB = 0.67). Determine if trade can take place that would benefit either or both. If trade can benefit either or both, determine who will trade for what.

Question 2

Refer to Scenario 12.3. What will be the price of this new drink in the long run if the firms in the industry collude with one another to maximize joint profit?
 
  A) 3
  B) 9
  C) 12
  D) 16.50
  E) none of the above


Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question
Marked as best answer by a Subject Expert

aloop

  • Sr. Member
  • ****
  • Posts: 315
Reply #1 on: Jul 1, 2018
Answer to Question 1

Trade is possible if the MRSXYA does not equal MRSXYB. In this problem, they are unequal; A is willing to give up up to 1.25 units of X to get one additional unit of Y, while B is willing to give up up to 1.5 units of Y to get one additional unit of X. Therefore A will trade X for Y while B trades Y for X. The exact terms of trade will be between 0.8 and 1.5 units of X for Y and will depend on the exact bargaining process.

Answer to Question 2

D


bobypop

  • Member
  • Posts: 539
Reply 2 on: Jul 1, 2018
Gracias!

okolip

  • Member
  • Posts: 362
Reply 3 on: Yesterday
YES! Correct, THANKS for helping me on my review

« previous next »
 

Did you know?

Approximately 500,000 babies are born each year in the United States to teenage mothers.

Did you know?

According to the FDA, adverse drug events harmed or killed approximately 1,200,000 people in the United States in the year 2015.

Did you know?

When intravenous medications are involved in adverse drug events, their harmful effects may occur more rapidly, and be more severe than errors with oral medications. This is due to the direct administration into the bloodstream.

Did you know?

The tallest man ever known was Robert Wadlow, an American, who reached the height of 8 feet 11 inches. He died at age 26 years from an infection caused by the immense weight of his body (491 pounds) and the stress on his leg bones and muscles.

Did you know?

Amphetamine poisoning can cause intravascular coagulation, circulatory collapse, rhabdomyolysis, ischemic colitis, acute psychosis, hyperthermia, respiratory distress syndrome, and pericarditis.

Female individuals of the banded Uromastyx, Uromastyx flavofasciata, are different colours. Most nat Female individuals of the banded Uromastyx, Uromastyx flavofasciata, are different colours. Most nat
A second jetliner approaches the south tower of the World Trade Center on September 11, 2001. The no A second jetliner approaches the south tower of the World Trade Center on September 11, 2001. The no
New Yorkers flee from the dust caused by the collapse of the twin towers of the World Trade Center f New Yorkers flee from the dust caused by the collapse of the twin towers of the World Trade Center f
Eggs, milk, and cheese are complete proteins, because they are animal products. Eggs, milk, and cheese are complete proteins, because they are animal products.
We are in the midst of the globalization of capitalism. The explosion that is sending products ... We are in the midst of the globalization of capitalism. The explosion that is sending products ...
Growth of World Trade, 1870–2010 Growth of World Trade, 1870–2010
Video: Haustral churning, Gastrocolic reflex and mass peristalsis & Defecation

For a complete list of videos, visit our video library