Re: Daily question

Posted by Amit Goyal on Mar 01, 2009; 1:23pm
URL: http://discussion-forum.276.s1.nabble.com/Daily-question-tp2328964p2404440.html

1st-4th Mar, 2009
WARP says that if a consumer chooses commodity bundle A when she can afford bundle B from any budget in which she can afford A. Check if WARP holds or not:
1) (x,y) = (2,3) and (p(x),p(y))=(1,4) ; (x’,y’) = (5,2) and (p(x’),p(y’))=(1,5)
2) (x,y) = (2,3) and (p(x),p(y))=(2,1) ; (x’,y’) = (3,2) and (p(x’),p(y’))=(1,2)
3) (x,y) = (2,3) and (p(x),p(y))=(1,2) ; (x’,y’) = (3,2) and (p(x’),p(y’))=(2,1)

Kamal has been given a free ticket to attend a classical music concert. If Kamal had to pay for the ticket, he would have paid up to Rs. 300/- to attend the concert. On the same evening, Kamal’s alternative entertainment option is a film music and dance event for which tickets are priced at Rs. 200/- each. Suppose also that Kamal is willing to pay up to Rs. X to attend the film music and dance event. What does Kamal do, i.e., does he attend the classical music concert, or does he attend the film music and dance show, or does he do neither? Justify your answer.

Suppose there are two consumers A and B. Both consumers have a unit demand for the good. Consumer A has valuation $50 for it and consumer B's valuation is $20. What will be the monopolist price and quantity if he produces the good at 0 marginal cost? What will happen under duopoly i.e if there are two firms? What will be competitive output and quantity? Comment on DWL in three market structures.

You have 10 chocolates to divide among three individuals(A,B and C). All 3 prefer more chocolates to less.Find all the Pareto efficient allocations. Suppose individual A has 0 chocolates and the other two has 5 chocolates each. Find the competitive equilibrium price and allocation. Is the equilibrium pareto efficient?