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Consider Gregory and Felicia in the pure exchange economy, represented on a graph below. Gregory likes nectarines, but is indifferent to strawberries (consuming more or
Consider Gregory and Felicia in the pure exchange economy, represented on a graph below. Gregory likes nectarines, but is indifferent to strawberries (consuming more or fewer strawberries does not affect his utility). Felicia's preferences over strawberries and nectarines are strictly convex and satisfy "more is better" assumption. They are shown by blue indifference curves in the Edgeworth box (E-box). nectarines Felicia 50 Gregory 90 strawberries a) [2 points] Show an equitable allocation of goods (where each individual consumes exactly half of each good) in the E-box. Call this allocation A. Is it Pareto optimal (P.O.)? If yes, please explain why. If not, show all allocations that Pareto dominate allocation A. b) [2 points] Repeat part a) for allocation B, in which Gregory consumers half of all nectarines and no strawberries. c) [2 points] Repeat part a) for allocation C, in which Felicia consumes half of all
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