Workers in America pick 6 x-berries and 15 y-berries for an endowment fA = (6, 15). Their
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Workers in America pick 6 x-berries and 15 y-berries for an endowment fA = (6, 15). Their preferences are given as U = X2 Y. English workers harvest fE = (6, 6) and have preferences given by U = XY2 .Provide an Edgeworth Box showing the exchange rate p, the contract curve, PPR and core. Hungry raccoons feast on American y-berries and their endowment falls to fA = (6, 6). Recalculate the exchange rate. Explain why this change in the exchange rate is consistent with a reduction in the supply of good Y. Does this American misfortune make the English better off or worse off? Do trading partners share their misfortunes in the real world?
Related Book For
Microeconomics An Intuitive Approach with Calculus
ISBN: 978-0538453257
1st edition
Authors: Thomas Nechyba
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