A Small Economy Has Only Two Consumers, Ivan and Marilyn

A small economy has only two consumers, Ivan and Marilyn. Ivan's utility function is U(x, y) . Marilyn's utility function is U(x, y) = x + 3y. Ivan is endowed with 135 units of x and 60 units of y. They make trades to reach a Pareto optimal allocation of resources in which both persons consume positive amounts. How much y does Ivan consume?

A) 7 units
B) 12 units
C) 9 units
D) 18 units
E) There is not enough information to determine how much y he will consume.

Correct Answer:

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