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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Definitions:

Pupil

The black circular opening in the center of the iris of the eye, which regulates the amount of light that enters the eye.

Iris

The colored part of the eye surrounding the pupil that controls the amount of light entering the eye by adjusting the size of the pupil.

Middle Layer

Typically refers to the intermediate layer in a multi-layered structure, which could pertain to skin, geological formations, or other stratified materials.

Nerve Endings

The tips of nerve fibers where signals are received or sent, crucial for sensing and response mechanisms in the body.