Suppose That Paul and David Have Utility Functions U =

question 1

Multiple Choice

Suppose that Paul and David have utility functions U = 4A P + O P and U = A D + 4O D, respectively, where A P and O P are Paul's consumptions of apples and oranges and A D and O D are David's consumptions of apples and oranges. The total supply of apples and oranges to be divided between them is 20 apples and 12 oranges. The fair allocations consist of all allocations satisfying the following conditions.

• A) A_D = A_P and O_D = O_P.
• B) 8A_P + 2O_P is at least 92 and 2A_D + 8O_D is at least 68.
• C) 4A_P + O_P is at least 92 and 2A_D + 4O_D is at least 68.
• D) A_D + O_D is at least 16 and A_S + O_S is at least 16.
• E) 4A_P + O_P is at least A_D + 4O_D and A_D + 4O_D is at least 4A_P + O_P.

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Definitions:

Money Supply

The complete sum of available financial resources in an economy, including cash, coins, and the funds available in checking and savings accounts, at a particular instant.

Inflationary Tendencies

The general tendencies or trends towards increasing prices and diminishing purchasing power over time within an economy.

Federal Reserve

The central banking system of the United States, responsible for monetary policy, regulation of financial institutions, and ensuring stability of the financial system.

Recovery

Phase of business cycle during which real GDP increases from trough level to level of previous peak.