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Please answer parts a-c
Question 5: Consider the exchange economy of Nirvana, which consists of two people, A and B. Two goods are available for consumption, wine and chocolate. The endowment of the economy is 64 units of wine and 16 units of chocolate: As endowment is W* and CA, while Bs endowment is WB and Te lity functions for each individual are: UA 2(WAC) and U 10(W,C)3, where W, and C, are the amounts of wine and chocolate consumed by individual j. BE Careful, in that endowment values are starred, but consumption values are not! The marginal utliies for each good for each individual are 0.5 Let B and B B. Let Pc and Pwrepresent the price of chocolate and the price of wine Вв represent the money income of individuals A and A. Why is it permissible to set P equal to 1 when solving for the competitive general equilibrium? Verify Walras Law B. Suppose that W* 48 and CA- 8. Let PC-1. Find the competitive general equilibrium price of wine, the consumption bundles for each person, and the amount of each good bought or sold. Indicate the endowment point, the competitive allocation, and the price line in your Edgeworth Box. Indicate the point on the utilities possibility frontier which corresponds to the competitive general equilibrium. C. Verify the First Fundamental Theorem of Welfare Economics.
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