A Small Economy Has Only Two Consumers, Harold and Irene

question 12

Multiple Choice

A small economy has only two consumers, Harold and Irene.Harold's utility function is U(x, y) = x + 50y^1/2.Irene's utility function is U(x, y) = x + 5y.Harold is endowed with 500 units of x and 60 units of y.They make trades to reach a Pareto optimal allocation of resources in which both persons consume positive amounts.How much y does Harold consume?

• A)50 units
• B)25 units
• C)28 units
• D)23 units
• E)There is not enough information to determine how much y he will consume.

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