Bill and Ted like apples and oranges. Bill is always willing to substitute 1 apple for 1 orange. Ted is always willing to substitute 1 apple for 2 oranges.
a. Assume that there are 10 apples and 10 oranges to split between Bill and Ted. Construct an appropriately sized Edgeworth box for them.
b. Draw indifference curves for both Bill and Ted in your Edgeworth box. Draw Bill's indifference curves with thick lines, and Ted's with thin lines. (Hint: Remember that both Bill and Ted believe that apples and oranges are perfect substitutes!)
c. Demonstrate that any initial allocation of apples and oranges in which Bill and Ted each have some apples and some oranges is Pareto-inefficient.
d. Find a few Pareto-efficient allocations; then shade the consumption contract curve.