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Economics Homework Problems

## Problem 1: Fairness

Answer as briefly as you can and up to the point to all questions. Write down your answers in a separate document and submit your work on Moodle by clicking on the relevant submission link. Your submission needs to be in a single file. If you need to draw graphs by and to answer a certain question, scan and edit them appropriately. Then, include the scanned graph in your submitted document.

Problem 1. Fairness

Consider the society in which you live, or another society you are familiar with. How fair is this society, and why? (use the substantive and procedural fairness concepts)

Problem 2. Allocations imposed by force

Consider allocations which are imposed by force. Angela and Bruno’s feasible frontier, and Angela’s biological survival constraint.

If Bruno can impose the allocation with force:

A) He will choose the technically feasible allocation where Angela produces the most grain.

B) His preferred choice will be where the marginal rate of transformation (MRT) on the feasible frontier equals the marginal rate of substitution (MRS) on the biological survival constraint.

C) He will not choose 8 hours of work, because the MRS between Angela’s work hours and subsistence requirements exceeds the MRT between work hours and grain output.

D) He will choose 13 hours of free time for Angela, and consume 10 bushels of grain.

Draw a new graph, which can illustrate how technological progress can make both Angela and Bruno better-off? Explain your intuition.

Explain (by shifting the curves) what happens if a more nutritious kind of grain is available for Angela to grow and consume.

Problem 5. Biological and economic feasibility (2)

briefly explain:

1. why a point on the biological survival constraint is higher (more grain is required) when Angela has fewer hours of free time. Why does the curve also get steeper when she works more?

2. why the biologically feasible set is not equal to the economically feasible set.

Problem 6. The rules of the game

Briefly explain why the introduction of voluntary transactions and government unemployment benefits changes the nature of the interaction between Angela and Bruno.