Question

Consider a pure exchange 2x2 edgeworth box economy model where each individual has preferences given by:

u(x,y) = ln(x) + ln(y)

Consumer A is endowed with 1 unit of x and 2 units of y. Consumer B is endowed with 3 units of x and 1 unit of y.

Which of the following coordinates in the edgeworth box represent allocations that are pareto efficient? Use the perspective of individual A's origin and report the coordinates inside the box (check all that applies)

1) (0, 0)

2) (4, 3)

3) (2, 3/2)

4) (3/4, 1)

Answer 1

answer is option (C) shows the pareto efficient allocation !