Astrids Utility Function Is U(H A, C A)= H a C

question 56

Multiple Choice

Astrids utility function is U(H A, C A) = H A C A.Birgers utility function is min{H B, C B}.If Astrids initial endowment is no cheese and 5 units of herring and if Birgers initial endowments are 6 units of cheese and no herring, then where p is a competitive equilibrium price of herring and cheese is the numeraire, it must be that demand equals supply in the herring market.This implies that

• A)6/(p + 1)+ 2.50 = 5.
• B)5/6 = p.
• C)6/p + 5/2p= 5.
• D)6/5 = p.
• E)min{5, 6} = p.

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