Microeconomics (7th Edition)
7th Edition
ISBN: 9780134737508
Author: R. Glenn Hubbard, Anthony Patrick O'Brien
Publisher: PEARSON
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Question
Chapter 10, Problem 10.4.6PA
To determine
Richard Thaler’s endowment effect.
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In an auction, potential buyers compete for a good by submitting bids. Adam Gallinsky, a social scientist from
NWU, compared eBay auctions in which the same good was sold. He found on average that, the higher the
number of bidders the higher the sales price. For example, in two separate auctions of identical IPods, the one
with the higher number of bidders brought the higher sales price. According to Gallinsky, this explains why
smart sellers set absurdly low opening prices (the lowest price the seller will accept), such as 1 cent for a new
IPod. Use the concept of consumer and producer surplus to explain this reasoning.
Elizabeth Swann and her husband consume wine (W) and books (B).
Elizabeth's utility function is UE(W, B) = W. Her husband's utility function is UH(W, B) = W. Elizabeth's
endowment is 16 bottles of wine and 5 books and her husband's endowment is 19 bottles of wine
and 14 books.
In the Edgeworth box, Elizabeth's consumption is measured from the lower left corner, and her
husband's from the upper right corner of the box; the wine is on the horizontal axis and books are on
the vertical axis.
Therefore, in an Edgeworth box for Elizabeth and her husband, any allocation is Pareto Optimal. True
or False?
Please submit 1 if True and O if False.
Jack Sparrow and his wife consume wine (W) and books (B).
Jack Sparrow's utility function is Ujack(W, B) = W. His wife's utility function is Uwife(W, B) = B. Jack's
endowment is 17 bottles of wine and 5 books and Jack's wife's endowment is 20 bottles of wine and
14 books.
In the Edgeworth box, Jack's consumption is measured from the lower left corner, and his wife's from
the upper right corner of the box; the wine is on the horizontal axis and books are on the vertical
axis.
Therefore, in an Edgeworth box for Jack and his wife, there is only one Pareto Optimal allocation
that is located in the top left corner of the box. True or False?
Please submit 1 if True and O if False.
Chapter 10 Solutions
Microeconomics (7th Edition)
Ch. 10.A - Prob. 1RQCh. 10.A - Prob. 2RQCh. 10.A - Prob. 3RQCh. 10.A - Prob. 4PACh. 10.A - Prob. 5PACh. 10.A - Prob. 6PACh. 10.A - Prob. 7PACh. 10.A - Prob. 8PACh. 10.A - Prob. 9PACh. 10.A - Prob. 10PA
Ch. 10.A - Prob. 11PACh. 10.A - Prob. 12PACh. 10 - Prob. 10.1.1RQCh. 10 - Prob. 10.1.2RQCh. 10 - Prob. 10.1.3RQCh. 10 - Prob. 10.1.4RQCh. 10 - Prob. 10.1.5PACh. 10 - Prob. 10.1.6PACh. 10 - Prob. 10.1.7PACh. 10 - Prob. 10.1.8PACh. 10 - Prob. 10.1.9PACh. 10 - Prob. 10.1.10PACh. 10 - Prob. 10.1.11PACh. 10 - Prob. 10.1.12PACh. 10 - Prob. 10.2.1RQCh. 10 - Prob. 10.2.2RQCh. 10 - Prob. 10.2.3RQCh. 10 - Prob. 10.2.4PACh. 10 - Prob. 10.2.5PACh. 10 - Prob. 10.2.6PACh. 10 - Prob. 10.2.7PACh. 10 - Prob. 10.2.8PACh. 10 - Prob. 10.2.9PACh. 10 - Prob. 10.2.10PACh. 10 - Prob. 10.2.11PACh. 10 - Prob. 10.3.1RQCh. 10 - Prob. 10.3.2RQCh. 10 - Prob. 10.3.3RQCh. 10 - Prob. 10.3.4PACh. 10 - Prob. 10.3.5PACh. 10 - Prob. 10.3.6PACh. 10 - Prob. 10.3.7PACh. 10 - Prob. 10.3.8PACh. 10 - Prob. 10.3.9PACh. 10 - Prob. 10.4.1RQCh. 10 - Prob. 10.4.2RQCh. 10 - Prob. 10.4.3RQCh. 10 - Prob. 10.4.4RQCh. 10 - Prob. 10.4.5PACh. 10 - Prob. 10.4.6PACh. 10 - Prob. 10.4.7PACh. 10 - Prob. 10.4.8PACh. 10 - Prob. 10.4.9PACh. 10 - Prob. 10.4.10PACh. 10 - Prob. 10.4.11PACh. 10 - Prob. 10.4.12PACh. 10 - Prob. 10.4.13PACh. 10 - Prob. 10.4.14PACh. 10 - Prob. 10.4.15PACh. 10 - Prob. 10.4.16PACh. 10 - Prob. 10.1CTECh. 10 - Prob. 10.2CTECh. 10 - Prob. 10.3CTE
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