1. Consider a two-person, two-commodity, pure exchange economy with:U = 142, Uz = q21922,911 +92191 and 912 + 922 = 92Derive the contract curve as am implicit function of q11 and 912. What condition onthe coefficients a and ß will ensure that the contract curve is a straight line?State coase's theorem and evaluate the following statement in the relevance of thetheorem."It doesn't matter whether the polluter has the right to pollute or the victim hasthe right to be free of pollution. Either way the outcome is efficient."

Given information U1=q11αq12U2=q21βq22q11+q21=q10q12+q22=q20

1. Consider a two-person, two-commodity, pure exchange economy with: U =qh42, U, = 1922, 911 +9219, and 912 + 922 = = 92 Derive the contract curve as am implicit function of 911 and q12. What condition on the coefficients a and ß will ensure that the contract curve is a straight line?

1. Consider a two-person, two-commodity, pure exchange economy with: U =qh42, U, = 1922, 911 +9219, and 912 + 922 = = 92 Derive the contract curve as am implicit function of 911 and q12. What condition on the coefficients a and ß will ensure that the contract curve is a straight line?

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter13: General Equilibrium And Welfare

Section: Chapter Questions

Problem 13.6P

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Question

1. Consider a two-person, two-commodity, pure exchange economy with:
U = 142, Uz = q21922,
911 +92191 and 912 + 922 = 92
Derive the contract curve as am implicit function of q11 and 912. What condition on
the coefficients a and ß will ensure that the contract curve is a straight line?
State coase's theorem and evaluate the following statement in the relevance of the
theorem.
"It doesn't matter whether the polluter has the right to pollute or the victim has
the right to be free of pollution. Either way the outcome is efficient."

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