Quiz II

1. Draw two Edgeworth boxes for an economy with two expected utility maximizers, one commodity, and two states of the world. Neither preferences nor endowments need be the same, but the aggregate endowment of the economy is the same in both states of nature. In the first box they have identical beliefs. In the second, they have different beliefs. In each case, draw some equilibria and identify where the equilibria can be found.
2. With expected utility preferences and one good in each state, what is the MRS for any diagonal consumption bundle?
3. Now draw an Edgeworth box for the situation where traders have identical beliefs and one state has more aggregate commodity than the other. How is risk shared?

 

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