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Unformatted text preview: tter and no jelly, and Karen receives 10 jelly and no peanut butter, after trading, they will each end up with 5 units of each. 9. Suppose that David and Harry consume oranges and apples. David views the two as perfect complements. Harry views them as perfect substitutes. Each reaches his hand into a bag and selects six pieces of fruit but cannot see what they have chosen until it is in their basket. Assume that the bag the bag only has 12 pieces of fruit – 6 apples and 6 oranges. If they apply the Pareto criterion to wealth distribution, what will be their final endowment after trading? 10. In Problem 9, if Harry decides not to follow the Pareto criterion and each must pay a very small fee for each trade, what will be the effect on trading? F ol l ow i ng q u est i ons w i l l not b e g r a d e d , t h e y a r e f o r you to p r a c t i c e a n d w i l l b e d i sc usse d a t t h e
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6. Ch. 10
Ch. 10 question 10
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