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7. Consider an Edgeworth box with 2 consumers and 2 goods. Initially A has all of good 1 (10 units), and B has all of go
Posted: Sat Mar 19, 2022 5:51 pm
by answerhappygod
- 7 Consider An Edgeworth Box With 2 Consumers And 2 Goods Initially A Has All Of Good 1 10 Units And B Has All Of Go 1 (61.29 KiB) Viewed 46 times
7. Consider an Edgeworth box with 2 consumers and 2 goods. Initially A has all of good 1 (10 units), and B has all of good 2 (also 10 units). The market is in a competitive equilibrium, where A consumes 2 units of each good, and B consumes 8 units of each. If we wanted to increase consumer A's utility, how can we do that without introducing inefficiencies? A. Move some units of good 2 from B's initial endowment to A's endowment B. Change their initial endowments so that they each start with 5 units of each good C. Keep the same initial endowments, but fix prices to equal each other. D. According to the first welfare theorem, this equilibrium is fair, so there is no reason to interfere. E. It is impossible to increase A's utility without introducing inefficiencies.