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Consider a two-agent general equilibrium model represented by an Edgeworth box, with an endowment point E at which consumers have utility levels U and U2.
Consider a two-agent general equilibrium model represented by an Edgeworth box, with an endowment point E at which consumers have utility levels U and U2. A social planner (e.g., the government) redistributes the resources in a manner such that at the new allocation G consumer 1 is at a new utility level U> U, but consumer 2 remains at the old utility level U2. At allocation G, the MRS of the first consumer is equal to the MRS of the second consumer. Compared to allocation E, allocation G is Pareto improving, but not Pareto efficient O Pareto efficient, but not Pareto improving. O Pareto improving and Pareto efficient. Neither Pareto improving nor Pareto efficient There is not enough information to answer the
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