Open Word and answer the following questions. Save the document and print it when you are done.
1. Is the monopoly solution better than the initial endowment? Explain. Hint: Use Figure 3.2.4.4 as a reference.
2. Suppose A really liked x1, so that cA (cell B21) was
2. How would this change A's utility maximizing price of x1? What is the monopoly solution? Describe your procedure.
3. In an earlier chapter, we used a supply and demand (partial equilibrium) analysis to show that price ceilings in a competitive market cause an inefficient allocation of resources. Use Word's Drawing Tools to create an Edge worth Box with a price ceiling on x1. Explain why price ceilings are undesirable in this general equilibrium setting.