Suppose That Morris Has the Utility Function U(b, W)= 5b

question 4

Multiple Choice

suppose that Morris has the utility function U(b, w) = 5b + 15w 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 with slope 1/3 passing through the lower left corner of the box.
• B)a straight line with slope 1/3 passing through the upper right corner of the box.
• C)a straight line running from the upper right corner of the box to the lower left.
• D)a curve that gets steeper as you move from left to right.
• E)a curve that gets flatter as you move from left to right.

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Definitions:

Economic Profit

A financial gain that exceeds both the explicit and implicit costs associated with business operations.

Natural Monopolist

A firm that can supply the entire market at a lower cost than any combination of two or more smaller firms, often due to economies of scale.

Maximum Price

A price ceiling set by authorities to prevent prices from going above a certain level, often to make goods affordable.

Pure Monopolist

A market structure wherein a single company exclusively controls the entire market for a particular good or service, facing no competition.