Consider the 2 2 production model. Production functions are given by f1(z11, z21) = (z11)^1
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Consider the 2 × 2 production model. Production functions are given by f1(z11, z21) = (z11)^α1 · (z21)^1−α1, f2(z12, z22) = (z12)^α2 · (z22)^1−α2 where αj ∈ (0, 1) for all j = 1, 2 and zij ≥ 0 for all i = 1, 2 and j = 1, 2. Show that if the set of technologically efficient factor allocations (the Pareto set) ever cuts the diagonal of the Edgeworth Box, then it must coincide with the diagonal.
Related Book For
Mathematical Statistics with Applications in R
ISBN: 978-0124171138
2nd edition
Authors: Chris P. Tsokos, K.M. Ramachandran
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