Re: DSE 2011 and 2012 Doubts

Posted by duck on Jun 22, 2013; 4:33pm
URL: http://discussion-forum.276.s1.nabble.com/DSE-2011-and-2012-Doubts-tp7582723p7582739.html

Hi.. :)

2012:

2) For Pareto optimal points, what matters is the total availability of the two goods.
So, if A tranfers some of his endownment to B then also, the total amount avaiable in the economy will be the same. Thats why option(i) is ruled out.
However, if A's endownment has increased then, total amount of good available has gone up. So, pareto optional allocation (before the change) may not remain pareto efficient.
Hence, option(ii) is correct.


23) Its because if any firm charges different price other than 6 then, its always beneficial for the firm to deviate. Its like saying any price apart 6 will not be a best response.Hence, cannot be an equilibrium.
Therefore, equilibirum price=6.