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[solution] » In an exchange economy with consumers U 1 =X 1 Y 1 2 and U 2

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In an exchange economy with consumers U 1 =X 1 Y 1 2 and U 2

  1. In an exchange economy with consumers U1=X1Y12  and U2=min(X2, 2Y2)+aY1 , and endowments  e1=(3,5) and e2=(6,2)


    None of the three answers is true.


    If a>0, then there is a bad externality on consumer 2.


    If a>0, then there is a good externality on consumer 1.


    Equilibrium is Pareto Efficient.


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