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1) Endowments and utility functions are: e 1 = (10, 50) , u1 (C, W) =...

1) Endowments and utility functions are: e 1 = (10, 50) , u1 (C, W) = C 1/2W1/2 e 2 = (80, 10) , u2 (C, W) = C 1/2W1/2

2) Endowments and utility functions are: e 1 = (30, 24) , u1 (C, W) = C 1/2W1/2 e 2 = (60, 36) , u2 (C, W) = C 1/2W1/2 1

3) Endowments and utility functions are: e 1 = (30, 24) , u1 (C, W) = C 1/3W2/3 e 2 = (60, 36) , u2 (C, W) = C 1/2W1/2 Note: You should see from Problems 1,2 that exchange equilibrium depends on the initial endowments of the individual consumers, not just on the social endowment of the goods; and you should see from Problem 3 that exchange equilibrium depends on the preferences of the individual consumers.

4) Endowments and utility functions are: e 1 = (40, 10) , u2 (C, W) = C + W e 2 = (10, 40) , u1 (C, W) = min{C, W} Compare the utilities of Consumer 1 and Consumer 2 at their initial endowments and at their equilibrium consumptions.

5) Endowments and utility functions are: e 1 = (10, 40) , u1 (C, W) = min{C, W} e 2 = (40, 10) , u2 (C, W) = min{C, W} In this case there are many exchange equilibria. Hint: If prices are pC, pW what will consumers 1, 2 choose?

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