Suppose That Morris Has the Utility Function U(b, W)= 4b

question 18

Multiple Choice

suppose that Morris has the utility function U(b, w) = 4b + 12w and Philip has the utility function U(b, w) = bw.If we draw an Edgeworth box with books on the horizontal axis and wine on the vertical axis and if we measure Morris's consumptions from the lower left corner of the box, then the contract curve contains

• A)a straight line running from the upper right corner of the box to the lower left.
• B)a curve that gets steeper as you move from left to right.
• C)a straight line with slope 1/3 passing through the lower left corner of the box.
• D)a straight line with slope 1/3 passing through the upper right corner of the box.
• E)a curve that gets flatter as you move from left to right.

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Definitions:

Market

The arena in which buyers and sellers come together to trade goods, services, or financial instruments, establishing prices through supply and demand.

Usury Law

Legislation that sets the maximum interest rate that can be charged on loans, to prevent lenders from imposing excessively high rates.

Market Rate

The prevailing interest rate available in the market for loans or the rate at which other financial instruments are priced, often influenced by the supply and demand for money.

Shortage

A situation where the demand for a product or service exceeds the available supply.