Dan and Marilyn Consume Two Goods, X and Y

question 35

Multiple Choice

Dan and Marilyn consume two goods, x and y.They have identical Cobb-Douglas utility functions.Initially Dan owns 10 units of x and 10 units of y.Initially Marilyn owns 40 units of x and 20 units of y.They make exchanges to reach a Pareto optimal allocation which is better for both than the no-trade allocation.Which of the following is not necessarily true about the allocation they trade to?

• A)Marilyn consumes 5 units of x for every 3 units of y that she consumes.
• B)The locus of Pareto optimal allocations is a diagonal straight line in the Edgeworth box.
• C)Dan's consumption of x is greater than his consumption of y.
• D)Dan consumes more than 10 units of x.
• E)Marilyn consumes at least 40 units of x.

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Definitions:

Excess Quantity

A situation where the supply of a product exceeds the demand for it.

Consumer Surplus

is the difference between the total amount that consumers are willing to pay for a good or service and the total amount that they actually pay.

Market Price

The immediate rate at which an asset or service can be traded in a specific trading place.

Producer Surplus

The gap between what sellers are prepared to accept for a product or service and the real amount they end up getting.