Suppose That Paul and David from Problem 7 Have Utility

question 22

Multiple Choice

Suppose that Paul and David from Problem 7 have utility functions U = 5A_P + O_P and U = A_D + 3O_D, respectively, where A_P and O_P are Paul's consumptions of apples and oranges and A_D and O_D are David's consumptions of apples and oranges. The total supply of apples and oranges to be divided between them is 12 apples and 20 oranges. The "fair" allocations consist of all allocations satisfying

• A) A_D = A_P and O_D = O_P.
• B) A_D + O_D is at least 16 and A_S + O_S is at least 16.
• C) 10A_P + 2O_P is at least 80 and 2A_D + 6O_D is at least 72.
• D) 5A_P + O_P is at least 80 and 2A_D + 3O_D is at least 72.
• E) 5A_P + O_P is at least A_D + 3O_D and A_D + 3O_D is at least 5A_P + O_P.

---

Definitions:

Probability

The measure of the likelihood that an event will occur, quantified as a number between 0 and 1, where 1 indicates certainty.

Insurance

A financial product that provides protection against financial losses from various risks like accidents, illnesses, or property damage.

Guaranteed Income

A system of social welfare provision that guarantees that all citizens or families have an income sufficient to live on, provided they meet certain conditions.

Expected Total Utility

The sum of satisfaction or benefit that a consumer anticipates receiving from consuming different quantities of goods and services.