Suppose the Economics Department has a graduation party for its students but as a final test they must show they have learned something about trade.The men are given food when they walk in and the women are given drink.Suppose they have identical preferences where food and drink provide utility U = FαDβ.The exchange would be such that

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Quizplus · Accepted Answer

Since both men and women have identical preferences, they can exchange the food and drink they received in a way that maximizes their individual utility. Since the exchange is voluntary, both parties will only agree to it if they are at least as well off or better off than before. Therefore, both men and women are guaranteed to be at least as well off as when they entered.

Suppose the Economics Department Has a Graduation Party for Its