Consider an economy with two people, Ava and Tim and and two goods (x and y). Avas utility is Ua = XaYa^2 and Tims utility is Ut = Xt^2Yt. Assume that Ava is endowed with one unit of good x (and no good y) and Tim with one unit of good y (and no good x).

A. Find the competitive equilibrium price and quantities for this economy.

B. Now suppose that Tims endowment of good y doubles, to two units and everything else remains the same. In the new equilibrium is Ava better off (in terms of utility)?

C. Now suppose instead that Ava's endowment of good x doubles, to two units. and everything else remains the same as the start. In the new equilibrium what is Ava's utility? How does this compare to your answer to in both parts above.

D. Think of Ava and Tim as countries rather than individuals, and interpret an increase in endowment as a resource discovery, such as the discovery of oil or natural gas. Use your answer to discuss the circumstances under which you would you rather have such a discovery in your own country, and those in which you would rather have it in another country.