A bit of a 'trick' question, frankly. Consider a 2 person, 2 good, pure exchange economy....

 

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A bit of a 'trick' question, frankly. Consider a 2 person, 2 good, pure exchange economy. Suppose person A has preferences represented by the utility function: 1/3 2/3 x/3x1/3} 2/3 x 1/31 x2 u (x1, x2) = min{x1 x2, and has endowment wA = (8,5). Suppose consumer B has preferences represented by the utility function B u (x1, x2) = x/3x/3 x1 x2 and has endowment wB = (8,5). 1. Provide the Edgeworth Box representation. 2. What is the Pareto Set of this economy? 3. What is the Contract Curve of this economy? 4. What is the Walrasian Equilibrium of this economy? 5. Suppose that Consumer A has the power to propose a take-it-or-leave-it offer of an allocation. What is the equilibrium allocation? 6. Suppose that consumer B has the power to announce a price ratio. What is the equilbrium in that situation? A bit of a 'trick' question, frankly. Consider a 2 person, 2 good, pure exchange economy. Suppose person A has preferences represented by the utility function: 1/3 2/3 x/3x1/3} 2/3 x 1/31 x2 u (x1, x2) = min{x1 x2, and has endowment wA = (8,5). Suppose consumer B has preferences represented by the utility function B u (x1, x2) = x/3x/3 x1 x2 and has endowment wB = (8,5). 1. Provide the Edgeworth Box representation. 2. What is the Pareto Set of this economy? 3. What is the Contract Curve of this economy? 4. What is the Walrasian Equilibrium of this economy? 5. Suppose that Consumer A has the power to propose a take-it-or-leave-it offer of an allocation. What is the equilibrium allocation? 6. Suppose that consumer B has the power to announce a price ratio. What is the equilbrium in that situation?

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1 The Edgeworth Box represents the initial endowments and possible allocations in a twoperson twogoo... View the full answer