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

question 48

Multiple Choice

Mutt's utility function is U(m, j) = max{3m, j} and Jeff's utility function is U(m, j) = 3m + j.Mutt is initially endowed with 6 units of milk and 2 units of juice and Jeff is initially endowed with 2 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)bottom edge of the Edgeworth box but no other edges.
• B)left edge of the Edgeworth box but no other edges.
• C)right edge of the Edgeworth box but no other edges.
• D)left edge and bottom edge of the Edgeworth box.
• E)right edge and top edge of the Edgeworth box.

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Definitions:

Money Supply

The sum of financial resources accessible within an economy at a given moment, encompassing cash, coins, and amounts present in both checking and savings accounts.

Government Purchases

Expenditures made by the government for goods and services that directly satisfy the needs of the community or help in the production of further goods.

Taxes

Mandatory monetary fees or different forms of charges levied on taxpayers by government entities with the purpose of financing government operations and a range of public spending.

Fiscal Policy

Government adjustments to its spending levels and tax rates to monitor and influence a nation’s economy.