Question 3. [30 points] Consider an economy consisting of just one farmer and one tailor. The farmer has 10 units of food but no clothing. The tailor has 20 units of clothing but no food. The farmer has the utility function U f = F02, and the tailor has the utility function U1 : F20, where F is the quantity of food and C is the quantity of clothing. (a) Derive the contract curve and draw it in an Edgeworth box, with food on the horizontal axis and clothing on the vertical axis. Show the endowment point and sketch the indifference curves of the farmer and the tailor, with the bottom left corner being the origin for the farmer. [10 points] (b) If the farmer and the tailor are allowed to trade, with the market price of clothing normalised to one, what will the market price of food be in equilibrium? 1What will the consumption of food and clothing of the farmer and the tailor be in equilibrium? Illustrate your answer on a carefully labelled Edgeworth box diagram. Show the price line and the competitive equilibrium allocation. [10 points] (c) Suppose the government decides that food consumption of the two cit- izens must be equal. Can the government achieve this objective if its policies are restricted to redistribution of clothing? If yes, then show how. If no, then explain why not. Illustrate your answer on a carefully labelled Edgeworth box diagram. (Hint: Use the Second Theorem of Welfare Economics.) [10 points]