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F is a small society that produces and consumes just two goods: tequila and medicine. The price of tequila and medicine are both $1 per unit, but the marginal utility of medicine is less than the marginal utility of tequila. All consumers have identical Cobb-Douglass preferences.

1. Explain how equilibrium is achieved. Provide a graph with your explanation. Place medicine on the horizontal axis and tequila on the vertical axis. Clearly label the budget line and the indifference curves before and in equilibrium.

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