Suppose There Are 10 Apples and 10 Oranges in the Economy

question 120

Multiple Choice

Suppose there are 10 apples and 10 oranges in the economy. Joe is currently consuming 4 apples and 5 oranges, and Jane is consuming 6 apples and 5 oranges. At this allocation, Joe's marginal utility of apples is 3, and his marginal utility of oranges is 5. Jane's marginal utility of apples is 6, and her marginal utility of oranges is 10. If the current price of apples is $4 and the current price of oranges is $5, then there is an:

• A) excess demand for apples and an excess supply of oranges.
• B) excess demand for oranges and an excess supply of apples.
• C) equilibrium in the market with no excess supply or demand for either good.
• D) excess supply of apples and oranges.

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