On a Certain Island There Are Only Two Goods, Wheat

question 5

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 10 units of milk or 16 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) all citizens consume the same commodity bundle.
• B) total milk production is 5,000 units.
• C) every consumer's marginal rate of substitution between milk and wheat is -1.
• D) the number of units of milk produced equals the number of units of wheat produced.
• E) None of the above is true at every Pareto optimal allocation.

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