On a Certain Island There Are Only Two Goods, Wheat

question 4

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 13 units of milk or 33 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) every consumer's marginal rate of substitution between milk and wheat is -1.
• B) all citizens consume the same commodity bundle.
• C) the number of units of milk produced equals the number of units of wheat produced.
• D) total milk production is 6,500 units.
• E) None of the above is true at every Pareto optimal allocation.

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Definitions:

High-Pitched Stimulus

A sound or signal at the higher end of the auditory frequency range, often perceived as sharp or shrill.

Weber Fraction

A principle that quantifies the perception of change in a given stimulus according to the Just Noticeable Difference (JND).

Sense Modality

A way in which sensory information is processed, including vision, hearing, touch, taste, and smell.

Response Criterion

A threshold in decision making or sensory detection beyond which a stimulus is perceived or a response is made.