An Economy Has Two People, Charlie and Doris

question 23

Multiple Choice

An economy has two people, Charlie and Doris. There are two goods, apples and bananas. Charlie has an initial endowment of 5 apples and 10 bananas. Doris has an initial endowment of 10 apples and 5 bananas. Charlie's utility function is U(A_C, B_C) = A_CB_C, where A_C is his apple consumption and B_C is his banana consumption. Doris's utility function is U(A_D, B_D) = A_DB_D, where A_D and B_D are her apple and banana consumptions. At every Pareto optimal allocation,

• A) Charlie consumes the same number of apples as Doris.
• B) Charlie consumes more bananas per apple than Doris does.
• C) Doris consumes equal numbers of apples and bananas.
• D) Charlie consumes 15 apples for every 15 bananas that he consumes.
• E) Doris consumes 10 apples for every 5 bananas that she consumes.

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Definitions:

External Control

Refers to the belief that one's behavior and outcomes are influenced or dictated by external forces beyond one's personal control.

Interactional Psychology

The psychological approach to understanding human behavior that involves knowing something about the person and about the situation.

Environmental Influences

External factors surrounding an individual or system that affect its development, behavior, or operations.

Emotionally Stable

The characteristic of being calm, not easily upset, and able to manage stress effectively.