You may remember Anna from the problem set. She got tired of trading with Brad, who was too complicated and is now living on an island with Bob.

Anna's utility is UA = X_AY_A and Bob is identical with UB = X_BY_B.

Anna's MRS_xy= Y_A/X_A and similarly Bob's MRS_xy= Y_B/X_B. Anna begins time with 1 of good X and 3 of good Y while Brad begins with 3 of good X and 1 of good Y. There is no production as on the problem set.

a) Draw an Edgeworth box with Anna in the bottom left. Mark the endowment point with a dot and draw in typical-looking indifference curves for Anna and Bob that go through that point.

b) Briefly define the notion of a contract curve. You should define any technical terms used in your definition. (For full credit your explanation should be in economic terms, not a description of points inside the box.)

c) Briefly explain whether the endowment described above is Pareto efficient or not.

d)During a storm some of the Anna's things get mixed together with Bob's things and as a result the new endowments are that Anna and Bob both have 2 of X and 2 of Y. Prove that there are no longer any mutually beneficial trades for them to negotiate