On a Certain Island There Are Only Two Goods, Wheat

On a certain island there are only two goods, wheat and milk. The only scarce resource is land. There are 1,000 acres of land. An acre of land will produce either 8 units of milk or 15 units of wheat. Some citizens have lots of land; some have just a little bit. The citizens of the island all have utility functions of the form U(M, W) = MW. At every Pareto optimal allocation,

A) every consumer's marginal rate of substitution between milk and wheat is -1.
B) the number of units of milk produced equals the number of units of wheat produced.
C) total milk production is 4,000 units.
D) all citizens consume the same commodity bundle.
E) None of the above is true at every Pareto optimal allocation.

Correct Answer:

Verified

Unlock this answer now
Get Access to more Verified Answers free of charge

Access For Free