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sider an exchange economy with two agents, 1 and 2, and two goods, X
and Y . Agent 1’s endowment is (0, 10) and Agent 2’s endowment is (11, 0).
Agent 1 strictly prefers bundle (a, b) to bundle (c, d) if, either a > c, or
a = c and b > d. Agent 2 strictly prefers bundle (a, b) to bundle (c, d) if
min{a, b} > min{c, d}. For both agents, we say that bundle (a, b) is indifferent
to bundle (c, d) if, neither (a, b), nor (c, d), is strictly preferred to the
other.
Question 6. This exchange economy has
(a) one competitive equilibrium allocation
(b) two competitive equilibrium allocations
(c) an infinite number of competitive equilibrium allocations
(d) no competitive equilibrium allocations
Question 7. Which of the following changes makes (pX, pY ) = (1, 0) a competitive
equilibrium price vector?
(a) agent 2’s endowment changes to (9, 0)
(b) agent 2’s endowment changes to (10, 0)
(c) agent 1’s endowment changes to (0, 12)
(d) none of the above
Question 8. Suppose only agent 2’s preferences are changed. The changed
preferences of agent 2’s become identical to those of agent 1. Then,
(a) there is no equilibrium price ratio
(b) both of the following are true
(c) pX/pY = 0 is an equilibrium price ratio
(d) pY /pX = 0 is an equilibrium price ratio
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