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Consider an Edge worth box for two people who have a total of 100 X and 100 Y. The person in the lower left corner is named Jeff, and the person in the upper right is named Star burns. Star burns only likes X and Y in exact proportions (1 X with 1 Y). Jeff likes them both equally, and is indifferent between an X or a Y.   Suppose Jeff starts out with 30 X and 70 Y, while Star burns has 70 X and 30 Y.

A. Draw this Edge worth box, label everything, and explain whether the starting point is pareto efficient. If it isn’t, shade in the region of the graph that would represent pareto improvements. If it is, explain why.

B. Draw the contract curve.

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M91233263

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