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The total available amount of good 1 and 2 is 9 and 12 units, respectively. Utility functions for households A and B are uA(xA1,xA2) =
The total available amount of good 1 and 2 is 9 and 12 units, respectively. Utility functions for households A and B are uA(xA1,xA2) = xA1xA2 and uB(xB1,xB2) = xB1x2B2. (a) Find an expression for the Pareto optimal set. (b) Assume eA = (4, 4) and eB = (5, 8) are A and B endowments, respectively. Find the competitive equilibrium. (c) Is the competitive equilibrium allocation in the Pareto Optimal set? Why this result should not surprise us
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Economics
Authors: Campbell R. McConnell, Stanley L. Brue, Sean M. Flynn
18th edition
978-0077413798, 0-07-336880-6, 77413792, 978-0-07-33688, 978-0073375694
