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EXERCISE 4 (25 points) Consider an exchange economy with two goods and two agents. Agent A has preferences represented by uA (3:11,:52'4) 2 (36?? + (rt-34)? Agent B has preferences represented by uB(xiB,9:2B) = (1915')2 + (x23)2. Both agents have endowments (1, 1). (1) Is it true that the more of a good an agent consumes, the larger the extra utility she gets from an additional unit of that good? (2) Draw some indifference curves for both agents. (3) Represent this economy in an Edgeworth box with the initial endowment and the indifference curves through the endowment. (4) Which allocations are in the core of this economy? (5) Is it possible that the price ratio be different from 1 in a Walrasian equilibrium? Why? Draw the budget line in the diagram. (6) What are the Walrasian equilibria of this economy? (Hint: Given (6), you will see that there cannot be a unique Welmsion equilibrium.)