Use the Following to Answer Question

question 35

Multiple Choice

Use the following to answer question:
Figure 15.5
-(Figure 15.5) Suppose that Elaine has 1 pancake and 4 bowls of cereal, which gives her a marginal utility of pancakes of 20 and marginal utility of cereal of 5. Jerry has 7 pancakes and 6 bowls of cereal, which gives him a marginal utility of pancakes of 6 and marginal utility of cereal of 18. Which of the following statements is (are) TRUE?

• A) The allocation is Pareto-efficient.
• B) Elaine and Jerry would both be better off if Elaine traded 1 pancake for 1 bowl of Jerry's cereal.
• C) A Pareto improvement would be for Elaine to give Jerry 2 bowls of cereal in exchange for 1 pancake.
• D) Elaine and Jerry would both be better off if Elaine traded 1/2 pancake for 1 bowl of Jerry's cereal.

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Definitions:

Bandwagon Effect

The phenomenon where the demand for a good or service increases as more people buy it, often influenced by perceptions of popularity or social pressure.

Social Network

A platform or system that connects individuals, organizations, or entities, facilitating communication and interaction among them.

Aggregate Demand

Aggregate demand represents the total demand for all goods and services in an economy at a given overall price level and in a given time period.

Market Price

The current price at which a good or service can be bought or sold in a given market.