Workers in America pick 6 x-berries and 15 y-berries for an endowment fA = (6, 15). Their preferences are given as U = X2 Y. English workers harvest fE = (6, 6) and have preferences given by U = XY2 .Provide an Edgeworth Box showing the exchange rate p, the contract curve, PPR and core. Hungry raccoons feast on American y-berries and their endowment falls to fA = (6, 6). Recalculate the exchange rate. Explain why this change in the exchange rate is consistent with a reduction in the supply of good Y. Does this American misfortune make the English better off or worse off? Do trading partners share their misfortunes in the real world?

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Lets analyze the scenario step by step in a structured and detailed manner 1 Initial Situation Endowments and Preferences American workers have an ini... View the full answer