On a Certain Island There Are Only Two Goods, Wheat

question 4

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 3 units of milk or 32 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) all citizens consume the same commodity bundle.
• C) every consumer's marginal rate of substitution between milk and wheat is -1.
• D) total milk production is 1,500 units.
• E) None of the above is true at every Pareto optimal allocation.

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