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You, a consumer, live in the United States, where dollars are used as currency, and there are two goods, x and y. A friend of
You, a consumer, live in the United States, where dollars are used as currency, and there are two goods, x and y. A friend of yours lives in the nation of Western Omelette, where Balboas are the currency, and there are the same two goods x and y. In the United States, the price of good x is $14 per unit and the price of good y is $5 per unit. In Western Omelette, the price of good x is 9 Balboas per unit, and the price of good y is 7 Balboas per unit. To maximize your utilities, you and your friend both spend all of your weekly incomes (you in dollars, her in Balboas) buying bundles of the goods. Your favorite bundle you can afford with one week's income is the bundle (8, 11) (8 units of good x, 11 of good y); your friend's favorite bundle she can afford with one week's income is the bundle (10, 9) (10 of x, 9 of y). You can never remember the exchange rate between dollars and Balboas. For fun, you and your friend decide to trade places: you will go to Western Omelette for a week, and your friend
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