Suppose Humphrey and Lauren has the same preferences as in Worked-Out Problem 16.2. Humphrey is endowed with

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Suppose Humphrey and Lauren has the same preferences as in Worked-Out Problem 16.2. Humphrey is endowed with 8 pounds of food and 9 gallons of water, while Lauren is endowed with 2 pounds of food and 1 gallon of water. The government would like to achieve the point on the contract curve where they share all resources equally-that is, each consumes 5 pounds of food and 5 gallons of water. However, the government cans only redistribute food (it cannot redistribute water). Is it possible to achieve the desired allocation by redistributing food from Humphrey to Lauren, and then allowing them to trade in a general competitive equilibrium? If so, how much food would the government need to redistribute?
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Microeconomics

ISBN: 978-1118572276

5th edition

Authors: David Besanko, Ronald Braeutigam

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