Looking for suggested solutions for the 4 below questions. I have $60 in available tutor credits and until Sunday evening of 3/27.
1) Your airplane crashes in the Pacific Ocean. You land on a desert island with one other passenger. A box containing 100 little bags of peanuts also washes up on the island. The peanuts are the only thing to eat. Is this economy with two people, one commodity, and no production, represent the possible allocations in a diagram, and explain why every allocation is Pareto efficient. Is every allocation fair?
2) Musetta can work as many hours as she wants to each day (no more than 24, of course) at a wage rate of $30 per hour. She also receives a $50 gift from her mother each day. Sketch Musetta’s daily budget constraint in a diagram with leisure on the horizontal axis and income on the vertical axis.
3) Consider an economy with two people, Victoria and Albert, and two commodities, tea and crumpets. Currently, Victoria and Albert would be willing to substitute two cups of tea for one crumpet. Further, if the economy were to produce one less cup of tea, the resources released from tea production could be used to produce three more crumpets. Is the allocation of resources in this economy Pareto efficient? If not, should there be more tea or more crumpets?
4) Thelma and Louise are neighbors. During the winter, it is impossible for a snowplow to clear the street in front of Thelma’s house without clearing the front of Louise’s. Thelma’s marginal benefit from snowplowing services is 12 – Z, where Z is the number of times the street is plowed. Louise’s marginal benefit is 8 – 2Z. The marginal cost of getting the street plowed is $16.
Sketch the two marginal benefit schedules and the aggregate marginal benefit schedule. Draw in the marginal cost schedule, and find the efficient level of provision for snowplowing services.