Consider a two-person endowment economy characterized by the Edgeworth Box below: a. b. C. X2 OA A E B OB XI Are the allocations depicted at points A and B Pareto efficient? Explain your reasoning. Add bowed indifference curves that reflect the utility that the two consumers get from the endowment depicted at point E (assume that they value both goods). What is meant by the term "Pareto improvement." In your diagram highlight the set of Pareto improving allocations given the endowment.

Consider a two-person endowment economy characterized by the Edgeworth Box below: a. b. C. X2 OA A E B OB XI Are the allocations depicted at points A and B Pareto efficient? Explain your reasoning. Add bowed indifference curves that reflect the utility that the two consumers get from the endowment depicted at point E (assume that they value both goods). What is meant by the term "Pareto improvement." In your diagram highlight the set of Pareto improving allocations given the endowment.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Below is an Edgeworth box of two individuals, Ross and Rosa, in the consumption of two goods, X and Y. Rosa Contract Curve IRos Ress 1. Consider allocations b-f (meaning points a, b, and f). Which allocations(s) A. are better for Ross than "a" (ignoring Rosa)? B. are better for Rosa than “a" (ignoring Ross)? C. are worse for both Ross and Rosa than "a"? D. are better for both Ross and Rosa than “a"? E. are Pareto superior to "a"? 2. Suppose that the initial allocation is point a between Ross and Rosa. A. Discuss how Ross's condition be made better off without harming Rosa (i.e., Rosa maintains her level of utility). B. Illustrate this in a separate diagram and label point/s as necessary (also, if other point/s will have to be made or incorporated). 3. Consider once again that the initial allocation is point a. A. Discuss (very briefly) how point d is reached as a Pareto efficient allocation between Ross and Rosa. B. illustrate this condition in a separate diagram. 4. Consider points b,…
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Jane has 11 liters of soft drinks and 10 sandwiches. Bob, on the other hand, has 9 liters of soft drinks and 10 sandwiches. With these endowments, Jane's marginal rate of substitution (MRS) of soft drinks for sandwiches is 5 and Bob's MRS is equal to 7. Draw an Edgeworth box diagram to show whether this allocation of resources is efficient. If it is explain why. If it is not, what changes will make both parties better off? 1.) Using the three-point curved line drawing tool, draw an indifference curve for Jane when consuming 11 liters of soft drinks and 10 sandwiches. Label this curve Uj. 2.) Using the three-point curved line drawing tool, draw an indifference curve for Bob when consuming 9 liters of soft drinks and 10 sandwiches. Label this curve Uğ. Carefully follow the instructions above, and only draw the required objects. Sandwiches 0₁ Jane 11 Soft drinks Bob OB 10 Q
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Person A has a utility function of and person B has a utility function Agent A and agent B have identical endowments of (1/2,1/2). (a) Illustrate this situation in an Edgeworth box diagram. (b) What is the equilibrium relationship between p1and p2? (c) What is the equilibrium allocation?
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