Marvin's Utility Function Is U_m(x₁,x₂)= X_1m + 2x_2m, Where X_1m

question 11

Multiple Choice

Marvin's utility function is U_m(x₁,x₂) = x_1m + 2x_2m, where x_1m and x_2m are quantities of goods x₁ and x₂ he chooses. Similarly, Shelly's utility function is U_s(x₁,x₂) = 2x_1s + x_2s. In total they have 10 units of x₁ and 10 units of x₂. Suppose the initial allocation is such that Marvin has all 10 units of good x₁ and Shelly has all 10 units of good x₂. Relative to the initial allocation, the allocation in which each of them has 5 units of each good:

• A)is a Pareto- improvement, and also Pareto optimal.
• B)is a Pareto improvement, and is not Pareto optimal.
• C)is not a Pareto- improvement.
• D)makes Marvin better- off and Shelly worse- off.

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