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Consider the allocation of two goods to two consumers, A and B. Consumer A's utility function is uA(TA, JA) = (FA + 2)(ya + 3). Consumer B's utility function is up(IB, VB) = (FB) - (UB)" Suppose the total amount of goods 1 and 2, (z, y) = (8, 12), is divided between consumers A and B. 1. In this context, what would it mean for an allocation of the two goods to be "economically efficient"? 2. Consider the following allocation: A gets bundle (IA, WA) = (6, 2) and B gets bundle (Is, UB) = (2, 10). Is the proposed allocation efficient? If yes, explain. If no, explain why not and what type of trade would yield an improvementStep by Step Solution
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