Question: 1 3 . Suppose that Hannah's utility function is ( U _ { H } = ) ( 3 T + 4
Suppose that Hannah's utility function is UH T C and that Jose's utility function is UJ T C where T is pounds of tea per year and C is pounds of coffee per year. Suppose there are fixed amounts of pounds of coffee per year and pounds of tea per year. Suppose also that the initial allocation is pounds of coffee to Hannah leaving pounds to Jose and pounds of tea to Hannah leaving pounds of tea to Jose
a What do the utility functions say about the marginal rates of substitution of coffee for tea?
b Draw the Edgeworth Box showing indifference curves and the initial allocation.
c Draw the contract curve on the Edgeworth Box. Explain why it looks different from the contract curves depicted in the text.
d Is the initial allocation of coffee and tea Pareto efficient?
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