An Economy Has Two People, Charlie and Doris

question 17

Multiple Choice

An economy has two people, Charlie and Doris. There are two goods, apples and bananas. Charlie has an initial endowment of 3 apples and 8 bananas. Doris has an initial endowment of 6 apples and 4 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 9 apples for every 12 bananas that he consumes.
• B) Charlie consumes more bananas per apple than Doris does.
• C) Doris consumes equal numbers of apples and bananas.
• D) Charlie consumes the same number of apples as Doris.
• E) Doris consumes 6 apples for every 4 bananas that she consumes.

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Definitions:

Accounting Records

Documentation and books that hold financial information and transactions of a business, essential for preparing financial statements.

Computer Equipment

The physical hardware used in or with computers, including peripherals such as keyboards, monitors, external drives, and other devices.

Initial Investment

The initial amount of money spent to start a project, acquire an asset, or invest in a financial product.

Connecting Link

A piece or component that joins two or more parts together in a mechanism or system.