Suppose Two People Start with an Initial Endowment and Trade

question 18

Multiple Choice

Suppose two people start with an initial endowment and trade until they obtain a Pareto-efficient allocation with the corresponding price line.What happens when more people who have the same tastes and endowments as the original two traders are included in the Edgeworth box analysis?

• A) The price line does not change.
• B) The price line becomes flatter.
• C) The price line becomes steeper.
• D) The price line shifts up or down depending upon how many of each type of trader is included in the analysis.

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