Suppose That in Problem 8, Mutt's Utility Function Is U(m

question 30

Multiple Choice

Suppose that in Problem 8, Mutt's utility function is U(m, j) = max{ 2m, j} and Jeff's utility function is U(m, j) = 3m + j. Mutt is initially endowed with 6 units of milk and 2 units of juice, and Jeff is initially endowed with 2 units of milk and 6 units of juice. If we draw an Edgeworth box with milk on the horizontal axis and juice on the vertical axis and if we measure goods for Mutt by the distance from the lower left corner of the box, then the set of Pareto optimal allocations includes the

• A) left edge of the Edgeworth box but no other edges.
• B) bottom edge of the Edgeworth box but no other edges.
• C) left edge and bottom edge of the Edgeworth box.
• D) right edge of the Edgeworth box but no other edges.
• E) right edge and top edge of the Edgeworth box.

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Definitions:

Positive Economic

An economic outlook indicating growth or constructive conditions within an economy, such as increasing GDP or employment rates.

Intermediate Stages

Phases or steps in a process or a production chain that occur between the initial and final stages.

Gross Domestic Product

The total monetary value of all finished goods and services produced within a country's borders in a specific time period, an important indicator of economic health.

Inventories

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