Consider a 2-good, 2-agent pure exchange economy where there are 10 units of each good and preferences are represented by DA, UB R30 →R where UA (XA) = 2XA1 + XA2 and uB (XB) = XB1 + 2XB2- Which 2 of the following 8 options are true: There are initial endowments from which we can have a Walrasian Equilibrium with prices p = (1, 0). O The only Pareto efficient allocation is XA = (10, 0), XB = (0, 10). O Every Pareto efficient allocation can be supported as a Walrasian Equilibrium after some reallocation of resources. We cannot apply the First Welfare Theorem because preferences violate local non-satiation. The allocation XA = (5, 10), XB = (5, 0) is Pareto efficient.

Consider a 2-good, 2-agent pure exchange economy where there are 10 units of each good and preferences are represented by DA, UB R30 →R where UA (XA) = 2XA1 + XA2 and uB (XB) = XB1 + 2XB2- Which 2 of the following 8 options are true: There are initial endowments from which we can have a Walrasian Equilibrium with prices p = (1, 0). O The only Pareto efficient allocation is XA = (10, 0), XB = (0, 10). O Every Pareto efficient allocation can be supported as a Walrasian Equilibrium after some reallocation of resources. We cannot apply the First Welfare Theorem because preferences violate local non-satiation. The allocation XA = (5, 10), XB = (5, 0) is Pareto efficient.

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter13: General Equilibrium And Welfare

Section: Chapter Questions

Problem 13.5P

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