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:

Fats

Organic compounds consisting of triglycerides that are solid at room temperature, used as a major energy store in animals.

Triglyceride

A type of fat (lipid) found in your blood, formed from a single molecule of glycerol and three fatty acids.

Glycerol Molecule

A simple sugar alcohol compound with three hydroxyl (OH) groups, used as a sweetener and in pharmaceutical and cosmetic products.

Fatty Acid Molecules

Long-chain hydrocarbons with a carboxylic acid group at one end, important in dietary fats and cell membrane structure.