Consider a Society Consisting of Just a Farmer and a Tailor.The

question 33

Multiple Choice

Consider a society consisting of just a farmer and a tailor.The farmer has 10 units of food but no clothing.The tailor has 40 units of clothing but no food.Suppose each has the utility function U = F^1/2C1/2.If the price of clothing is always $1,and the food price is currently $3,then we can conclude

• A) the market is at a competitive equilibrium.
• B) the price of food will drop towards a competitive equilibrium.
• C) the price of food will increase towards a competitive equilibrium.
• D) None of the above.

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Definitions:

Ultimatum Game

A game in economic experiments where two players decide how to divide a sum of money, with one proposing the split and the other accepting or rejecting it.

Time Inconsistency Problems

A situation in which a person's preferences change over time, such that what they plan to do in the future is inconsistent with their future desires, leading to potential issues in decision-making or policy settings.

Precommitments

Voluntary actions or pledges made in advance by an individual or organization to restrict future choices, usually to avoid impulsive behavior or to stick to a strategic plan.

Behavioral Economists

Professionals who explore how various psychological, cognitive, emotional, cultural, and social factors affect the economic decisions made by both individuals and institutions.