Mutt's Utility Function Is U(m, J)= Max{3m, J} and Jeff's

question 20

Multiple Choice

Mutt's utility function is U(m, j) = max{3m, j} and Jeff's utility function is U(m, j) = 4m + j.Mutt is initially endowed with 4 units of milk and 2 units of juice and Jeff is initially endowed with 4 units of milk and 6 units of juice.If we draw an Edgeworth box with milk on the horizontal axis and juice on the vertical axis and if we measure goods for Mutt by the distance from the lower left corner of the box, then the set of Pareto optimal allocations includes the

• A)left edge and bottom edge of the Edgeworth box.
• B)right edge of the Edgeworth box but no other edges.
• C)bottom edge of the Edgeworth box but no other edges.
• D)left edge of the Edgeworth box but no other edges.
• E)right edge and top edge of the Edgeworth box.

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Definitions:

Cost Pools

Groupings of individual costs based on their similarity or a shared function, used in activity-based costing to allocate costs more accurately.

ABC System

Stands for Activity-Based Costing system, a method of allocating overhead and indirect costs to specific products or services based on their consumption of resources.

Prime Cost

Direct materials plus direct labor costs.

Machine Hours

The total number of hours that machines are used or operated during a specific time period, often used as a basis for allocating manufacturing overhead.