Consider the allocation of two goods to two consumers, A and B. Consumer A's utility function...

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Consider the allocation of two goods to two consumers, A and B. Consumer A's utility function is uA (TAYA) = (FA+2)(yA +3). Consumer B's utility function is un(TB₁YB) = (TB) - (UB)². Suppose the total amount of goods 1 and 2, (2, y) = (8, 12), is divided between consumers A and B. 1. In this context, what would it mean for an allocation of the two goods to be "economically efficient"? 2. Consider the following allocation: A gets bundle (A.JA) = (6, 2) and B gets bundle (TB, UB) = (2, 10). Is the proposed allocation efficient? If yes, explain. If no, explain why not and what type of trade would yield an improvement. Consider the allocation of two goods to two consumers, A and B. Consumer A's utility function is uA (TAYA) = (FA+2)(yA +3). Consumer B's utility function is un(TB₁YB) = (TB) - (UB)². Suppose the total amount of goods 1 and 2, (2, y) = (8, 12), is divided between consumers A and B. 1. In this context, what would it mean for an allocation of the two goods to be "economically efficient"? 2. Consider the following allocation: A gets bundle (A.JA) = (6, 2) and B gets bundle (TB, UB) = (2, 10). Is the proposed allocation efficient? If yes, explain. If no, explain why not and what type of trade would yield an improvement.

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1 An allocation of two goods to be economically efficient means that it maximizes the total utility ... View the full answer