Consider a Society Consisting of Just a Farmer and a Tailor.The

question 8

Multiple Choice

Consider a society consisting of just a farmer and a tailor.The farmer has 10 units of food but no clothing.The tailor has 40 units of clothing but no food.Suppose each has the utility function U = F^1/2C1/2.If the price of clothing is always $1,and the food price is currently $3,then we can conclude

• A)the market is at a competitive equilibrium.
• B)the price of food will drop towards a competitive equilibrium.
• C)the price of food will increase towards a competitive equilibrium.
• D)None of the above.

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Definitions:

Promoter

A person who participates in the initial setting up of a corporation or who assists the corporation in making a public share offering.

Corporation

A legal entity that is separate and distinct from its owners, who are shareholders; corporations can own assets, incur liabilities, and conduct business.

Public Share

Equity in a company that is available for trading by the general public on a stock exchange.

Securities Commission

A provincial agency that serves as a watchdog for the stock market.