Persons A and B are roommates. Person A smokes and Person B does not. The index s measures how smoky theroom is. It varies from s=0, when there is no smoke in the room, to s=1, when the room is filled with smoke. Thus,1-s measures how "clean" the air in the room is. Person A's utility function is ua(XA,s)=Xa.S, where xA is the amount ofmoney Person A owns. Person B's utility function is ug(xg, 1s)=Xg .(1-s)³, where xg is the amount of money Person Bowns. Each person starts with an endowment of 5 units of money. Person A has the legal right to a fill up the roomwith smoke and there exists a market for smoke "abatements". At the Walrasian equilibrium, how much money willperson B be left with?а. Хв31.25ОБ. Хв32.25O c.XB=0.25O d. Xg=0.25е.None of the other answers.

Persons A and B are roommates. Person A smokes and Person B does not. The index s measures how smoky the room is. It varies from s=0, when there is no smoke in the room, to s=1, when the room is filled with smoke. Thus, 1-s measures how "clean" the air in the room is. Person A's utility function is ua(XA,s)=Xa.S, where xA is the amount of money Person A owns. Person B's utility function is ug(Xp, 1s)=Xg .(1-s)³, where Xg is the amount of money Person B owns. Each person starts with an endowment of 5 units of money. Person A has the legal right to a fill up the room with smoke and there exists a market for smoke "abatements". At the Walrasian equilibrium, how much money will person B be left with? O a. Xg=1.25 O b. Xg=2.25 О с. ХB3D0.25 d. Xg=0.25 е. None of the other answers.

Persons A and B are roommates. Person A smokes and Person B does not. The index s measures how smoky the room is. It varies from s=0, when there is no smoke in the room, to s=1, when the room is filled with smoke. Thus, 1-s measures how "clean" the air in the room is. Person A's utility function is ua(XA,s)=Xa.S, where xA is the amount of money Person A owns. Person B's utility function is ug(Xp, 1s)=Xg .(1-s)³, where Xg is the amount of money Person B owns. Each person starts with an endowment of 5 units of money. Person A has the legal right to a fill up the room with smoke and there exists a market for smoke "abatements". At the Walrasian equilibrium, how much money will person B be left with? O a. Xg=1.25 O b. Xg=2.25 О с. ХB3D0.25 d. Xg=0.25 е. None of the other answers.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Persons A and B are roommates. Person A smokes and Person B does not. The index s measures how smoky the room is. It varies from s=0, where there is no smoke in the room, to s=1, when the room is filled with smoke. Thus, 1-s measures how "clean" the air in the room is. Person A's utility function is UA(XA,S)=XA+In(1+s), where xA is the amount of money Person A owns. Person B's utility function is uB(XB,1s)%3D3XB+2(1-s), where Xg is the amount of money Person B owns. Each person starts with an endowment of 5 units of money. Persch B has the legal right to a smoke-free room and there is a market for "emission right." At the Walrasian equilibrium, what will be the (per unit of smoke index) price p of the emission rights if the price of money is 1? O a. None of the other answers. O b. p=2/3 O c. p=1 O d. p=3/2 О е. р31/6
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