If an Allocation Is Pareto Optimal and If Indifference Curves

question 6

Multiple Choice

If an allocation is Pareto optimal and if indifference curves between the two goods have no kinks, then

• A)two consumers who consume both goods must have the same MRS between them, but consumers may consume the goods in different ratios.
• B)two consumers with the same income who consume both goods must have the same MRS, but if their incomes differ, their MRSs may differ.
• C)any two consumers who consume both goods must consume them in the same ratio.
• D)for any two consumers who consume both goods, neither will prefer the other consumer's bundle to his own.
• E)all consumers receive the bundle that they prefer to any other bundle the economy could produce for them.

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Definitions:

Decomposer

Organism, usually a bacterium or fungus, that breaks down organic matter into inorganic nutrients that can be recycled in the environment.

Mushroom

A type of fungus characterized by a cap and stem, with many species producing edible or medicinal fruiting bodies.

Herbivore

Primary consumer in a grazing food chain; a plant eater.

Plant Foods

Edible parts of plants, including fruits, vegetables, grains, nuts, and seeds, that are consumed by humans and other herbivores.