Question: Please see picture below. Exercise 3 30 pts Consider the following economy with production. There is a rm which can turn one unit of oranges

Please see picture below.

Exercise 3 30 pts Consider the following economy with production. There is a rm which can turn one unit of oranges into two apples, or two units of oranges into three apples. There is a consumer who is endowed with two oranges. The consumer sees apples and oranges as perfect complements, i.e. her utility function for consuming apples a and oranges 0 is, u = min(0, a) Restrict your attention to allocations that have only integer values , i.e. it is not possible to demand or supply fractional units of either good. 1. What is the set of Pareto Optimal allocations? (10 pts) 2. Consider the price system where po/pa = 2. What are the rm's prot-maximizing production plans? What are the rm's prots? (10 pts) 3. Is po/pa = 2 an equilibrium price ratio? Explain. (10 pts)

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