In an Exchange Economy A's Utility Is Given by U_A

question 17

Multiple Choice

In an exchange economy A's utility is given by U_A = x + y and B's by U_B = min[x,2y].The initial endowment for A is x = 10,y = 8 and for B,x = 8,y = 4.To reach the contact curve,these individuals must:

• A)trade 1x for 1y.
• B)trade 2x for 1y.
• C)trade 1x for 2y.
• D)do nothing,since they are already on the contract curve.

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