On a Certain Island There Are Only Two Goods, Wheat

question 25

Multiple Choice

On a certain island there are only two goods, wheat and milk. The only scarce resource is land. There are 1,000 acres of land. An acre of land will produce either 14 units of milk or 15 units of wheat. Some citizens have lots of land; some have just a little bit. The citizens of the island all have utility functions of the form U(M, W) = MW. At every Pareto optimal allocation,

• A) the number of units of milk produced equals the number of units of wheat produced.
• B) total milk production is 7,000 units.
• C) all citizens consume the same commodity bundle.
• D) every consumer's marginal rate of substitution between milk and wheat is -1.
• E) None of the above is true at every Pareto optimal allocation.

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