Suppose That Paul and David Have Utility Functions U =

question 25

Multiple Choice

Suppose that Paul and David have utility functions U = 4A P + O P and U F= A D + 4O D, respectively, where A P and O P are Paul's consumptions of apples and oranges and A D and O D are David's consumptions of apples and oranges.The total supply of apples and oranges to be divided between them is 20 apples and 12 oranges.The fair allocations consist of all allocations satisfying the following conditions.

• A)A_D = A_P and O_D = O_P.
• B)8A_P + 2O_P is at least 92 and 2A_D + 8O_D is at least 68.
• C)4A_P + O_P is at least 92 and 2A_D + 4O_D is at least 68.
• D)A_D + O_D is at least 16 and A_S + O_S is at least 16.
• E)4A_P + O_P is at least A_D + 4O_D and A_D + 4O_D is at least 4A_P + O_P.

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Definitions:

Profit-Maximizing

The process by which a company determines the price and output level that returns the greatest profit.

Long Run

A period in economics where all factors of production and costs are variable, allowing for full adjustment to changes.

ATC

Average Total Cost; the per unit cost of production, calculated by dividing the total cost by the quantity produced.

Monopolistically Competitive

A market structure characterized by many firms selling products that are similar but not identical.