(Edge worth box) Suppose Jimmy and Rita are in an exchange economy. Their endowments: apples and oranges. Suppose further that both Jimmy and Rita’s utility functions are concave in the two goods. Draw an Edge worth box for this exchange economy and see if the following statement is true or false:
If the initial allocation is that one party has all of endowment for one good and the two parties share the endowment of the other good (for example, Rita has all the oranges, and both Jimmy and Rita have some apples), then there is always room for Pareto improvement.