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SIMON FRASER ECON290 Tut1 - (a Show that if person 1 has...

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Economics 290: Canadian Microeconomic Policy Tutorial #1 (Week of January 11) 1. If a brother and sister return home from trick-or-treating on Halloween and engage in a series of voluntary trades of candies, we can conclude that the initial allocation of candy between them was inefficient. True/False. Explain. 2. An economy contains two people and two goods, apples and bananas. Both people like both goods, but value them differently. For person 1, 1 apple is exactly equivalent to 2 bananas. For person 2, 2 apples are exactly equivalent to 1 banana.
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Unformatted text preview: (a) Show that if person 1 has some bananas and person 2 has some apples, the resulting allocation must be inefficient. (b) There are three Pareto efficient allocations in this question. Can you find all of them? 3. Was NAFTA (North American Free Trade Agreement, a free trade agreement among Canada, the United States, and Mexico) Pareto improving? If not, why would governments pursue it? 4. Explain why Pareto efficiency is a weak evaluation criterion. 5. Why do people demand government goods and services? How much government is enough?...
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