Pete and Dud Live in a Two-Commodity World

question 2

Multiple Choice

Pete and Dud live in a two-commodity world.Pete's utility function is U ^P(x ^P₁, x ^P₂) = x ^P₁x ^P₂.Dud's utility function is U ^D(x ^D₁, x ^D₂) = min{x ^D₁, x ^D₂}.Pete is initially endowed with 3 units of commodity 1 and 4 units of commodity 2.Dud is initially endowed with 7 units of commodity 1 and 6 units of commodity 2.

• A)Both consume 5 units of each good in competitive equilibrium.
• B)At competitive equilibrium, Dud consumes 6 units of each, since the 7th unit of his endowment of commodity 1 gives him no added utility.
• C)At a competitive equilibrium, Dud must consume equal amounts of both goods, so the price of good 1 must equal the price of good 2.
• D)The prices of the two goods cannot be equal in equilibrium since Pete and Dud do not have equal endowments.
• E)None of the above.

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Definitions:

Re-experiencing

Reliving a traumatic event through intrusive memories, flashbacks, or nightmares, often a symptom of PTSD.

Posttraumatic Stress Disorder

A psychiatric disorder that can occur in people who have experienced or witnessed a traumatic event, characterized by flashbacks, nightmares, and severe anxiety.

HPA Axis

Hypothalamic-Pituitary-Adrenal axis, a central stress response system that regulates hormones affecting body processes like immune function and metabolism.

Hypothalamus

A region of the brain responsible for producing hormones that control bodily functions such as temperature regulation, hunger, and mood.