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1. Morris Zapp and Philip Swallow consume coffee (c) and tea (t). Morris has an initial endowment of 60 bags of coffee and 10 bags of tea. Philip has an initial endowment of 20 bags of coffee and 30 bags of tea. They have no other assets and make no trades with anyone other than each other. For Morris, coffee and tea are substitutes. His utility function is U (c, t) = c + 2t. Philip's preferences are more subtle and convex. He has a Cobb-Douglas utility function, U (c, t) = c²t. A. Draw an Edgeworth box where Morris's consumption is measured from the lower left, and Philip's is measured from the upper right corner of the box. B. On this Edgeworth box, mark the initial endowment point and label it E. C. Use red ink to draw Morris Zapp's indifference curve that passes through his initial endowment. D. Use blue ink to draw Philip Swallow's indifference curve that passes through his initial endowment. E. Shade the area that represents the set of Pareto-Improving points. F. Find the condition for Pareto-Optimal allocation.

1. Morris Zapp and Philip Swallow consume coffee (c) and tea (t). Morris has an initial endowment of 60 bags of coffee and 10 bags of tea. Philip has an initial endowment of 20 bags of coffee and 30 bags of tea. They have no other assets and make no trades with anyone other than each other. For Morris, coffee and tea are substitutes. His utility function is U (c, t) = c + 2t. Philip's preferences are more subtle and convex. He has a Cobb-Douglas utility function, U (c, t) = c²t. A. Draw an Edgeworth box where Morris's consumption is measured from the lower left, and Philip's is measured from the upper right corner of the box. B. On this Edgeworth box, mark the initial endowment point and label it E. C. Use red ink to draw Morris Zapp's indifference curve that passes through his initial endowment. D. Use blue ink to draw Philip Swallow's indifference curve that passes through his initial endowment. E. Shade the area that represents the set of Pareto-Improving points. F. Find the condition for Pareto-Optimal allocation.

Principles of Microeconomics
Principles of Microeconomics
7th Edition
ISBN:9781305156050
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter22: Frontiers Of Microeconomics
Section: Chapter Questions
Problem 6PA
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1. Morris Zapp and Philip Swallow consume coffee (c) and tea (t). Morris has an initial endowment of 60 bags of coffee and 10 bags of tea. Philip has an initial endowment of 20 bags of coffee and 30 bags of tea. They have no other assets and make no trades with anyone other than each other. For Morris, coffee and tea are substitutes. His utility function is U (c, t) = c + 2t. Philip's preferences are more subtle and convex. He has a Cobb-Douglas utility function, U (c, t) = c²t. A. Draw an Edgeworth box where Morris's consumption is measured from the lower left, and Philip's is measured from the upper right corner of the box. B. On this Edgeworth box, mark the initial endowment point and label it E. C. Use red ink to draw Morris Zapp's indifference curve that passes through his initial endowment. D. Use blue ink to draw Philip Swallow's indifference curve that passes through his initial endowment. E. Shade the area that represents the set of Pareto-Improving points. F. Find the condition for Pareto-Optimal allocation.
Transcribed Image Text:1. Morris Zapp and Philip Swallow consume coffee (c) and tea (t). Morris has an initial endowment of 60 bags of coffee and 10 bags of tea. Philip has an initial endowment of 20 bags of coffee and 30 bags of tea. They have no other assets and make no trades with anyone other than each other. For Morris, coffee and tea are substitutes. His utility function is U (c, t) = c + 2t. Philip's preferences are more subtle and convex. He has a Cobb-Douglas utility function, U (c, t) = c²t. A. Draw an Edgeworth box where Morris's consumption is measured from the lower left, and Philip's is measured from the upper right corner of the box. B. On this Edgeworth box, mark the initial endowment point and label it E. C. Use red ink to draw Morris Zapp's indifference curve that passes through his initial endowment. D. Use blue ink to draw Philip Swallow's indifference curve that passes through his initial endowment. E. Shade the area that represents the set of Pareto-Improving points. F. Find the condition for Pareto-Optimal allocation.
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