## Question

###### # 10. Angie has 12 cookies, and a marginal value curve described by P = 45...

# 10. Angie has 12 cookies, and a marginal value curve described by P = 45 - 30 while Benny has 0 cookies, and a marginal value curve described by P = 44 - 2QB a. Draw a three sided trade diagram, with Benny's marginal value curve going from left to right, and Angie's going from right to left. Be careful to state how wide the diagram is in terms of units of cookies. Draw both marginal value curves in this diagram. b. How might we interpret Angie's marginal value curve in this context? What are their marginal values before trade? c. After trade, how many cookies do each of them have? What is the marginal value of each person after trade? d. If we assume that all cookies traded at a price equal to the final marginal values, what are the consumer and seller surplus from trade? 11 IC

## Answers

Answert * Given collect from the data * let us assume that the equations are * Now we have to consider at p = 45-30A put QA =0 we get 45 and p=44-28a @ Now we have to draw the three-sides frode diagram and its both marginal value curves in the diagram MVB MVA 1 12 QA E 12 it is the two these trade equalibrium 6 The might will be Angie margiel value curve in to content and their marginal values before - change wantity QA the values of sacrifies cookies and its long MVAC MUB its benny values cookies by the trades equalibrium avrow's by the diagrgomThey are trades cookies of the marginal values of each person after trade Now 45-3x = 44-2012-x) and its be'is equalib ricon Valle then 12-x we have 45-34 = 2otar a=7 its equalibrium P=24 a let us assume that all cookies have prce equal to to morgin values → They are consumer to the seller suples from trades let p=7 we know that Producer Surplus = area ( EAB) and consumer Surplus savealas then → (AEAB) = /2 X5 X 15 37.5 => 50 -) (AEAC) = 1285x20 of THE END

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