Two Individuals $\mathrm { A }$ And $\mathrm { B }$ , Consume Two Goods

question 44

Multiple Choice

Two individuals, $\mathrm { A }$ and $\mathrm { B }$ , consume two goods, $x$ and $y$ . Consumer $\mathrm { A }$ initially has 3 units of $x$ and 2 units of $y$ . Consumer B initially has 5 units of $x$ and 6 units of $y$ . Also, for Consumer A the $M R S _ { x , y } ^ { A } = \frac { 5 x } { 3 y }$ and for Consumer $\mathrm { B }$ the $M R S _ { x , y } ^ { B } = \frac { 3 x } { y }$ . Does this initial allocation of $x$ and $y$ represent an efficient allocation?

• A) Yes
• B) No, because both consumers could be made better off by giving A more \(x\) and less \(y\).
• C) No, because both consumers could be made better off by giving A more \(y\) and less \(x\).
• D) Cannot be determined from the given information.

Comprehend the definition and calculation of opportunity cost and its significance in economic decision-making.

Analyze the effects of trade and specialization on an economy's production and consumption possibilities.

Distinguish between absolute and comparative advantage in trade relationships.

Recognize the conditions under which economies or individuals can benefit from trade, even when one party is more efficient in all areas of production.

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Definitions:

Rumination

The compulsive focus on one's own negative thoughts or feelings, leading often to emotional distress.

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Embarrassment

A feeling of self-consciousness, shame, or awkwardness that arises from an event or action perceived as socially inappropriate or humiliating.