Open Word and answer the following questions. Save the document and print it when you are done.
1. Why do the Pareto criteria fail to provide a single point that is the best allocation?
2. What must be true about the exponents in the Cobb-Douglas utility functions for consumers A and B to generate a linear contract curve? Describe your procedure and explain your answer.
3. Use Word's Drawing Tools to draw an Edgeworth Box with well-behaved preferences and a point Z, where the MRSA > MRSB. Explain why point Z is not Pareto Optimal.
4. The contract curve (with cA = 0.5) can be transformed into a utility possibilities frontier, as shown in Figure 3.2.3.5. Where would point Z (from the previous question) be on this graph? Explain why.
