1

Consider an Edgeworth box exchange economy. Preferences are represented by the follo wing utility functions u(x], x2) = 18 - (x] -3)2 - (x7 -3)2 uz(x], x?) = min{z], z?). Initial endowment is given by w = ((4,3), (0, 1)). (ii) State the set of Pareto efficient allocations (PEA) and the set of Walras equilibria (WE) of this economy. (iii) Does a WE exist for any possible initial endowment? Explain. (iv) In this economy, can any PEA be supported as a price equilibrium with transfers? Explain