Consider a case of pure exchange, with no externalities. Amy has the utility function UA =0.5XA...

 

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Consider a case of pure exchange, with no externalities. Amy has the utility function UA =0.5XA + 0.5YA and Betty has the utility function UB = 0.5XB0.5B 0.5. The resource constraint is XA + XB = 10 and yA + y = 8. Consider the following two allocations. One is XA = 0, y = 0 and XB = 10, YB = 8; the other is XA= 5, yA = 4 and XB = 5, yB = 4. Are these two allocations Pareto efficient? Explain. If the answer is no, find a Pareto improvement. Consider a case of pure exchange, with no externalities. Amy has the utility function UA =0.5XA + 0.5YA and Betty has the utility function UB = 0.5XB0.5B 0.5. The resource constraint is XA + XB = 10 and yA + y = 8. Consider the following two allocations. One is XA = 0, y = 0 and XB = 10, YB = 8; the other is XA= 5, yA = 4 and XB = 5, yB = 4. Are these two allocations Pareto efficient? Explain. If the answer is no, find a Pareto improvement.