Multiple Choice
An economy has two people, Charlie and Doris.There are two goods, apples and bananas.Charlie has an initial endowment of 6 apples and 4 bananas.Doris has an initial endowment of 12 apples and 2 bananas.Charlie's utility function is U(AC, BC) =ACBC, where AC is his apple consumption and BC is his banana consumption.Doris's utility function is U(AD, BD) =ADBD, where AD and BD are her apple and banana consumptions.At every Pareto optimal allocation,
A) Charlie consumes the same number of apples as Doris.
B) Charlie consumes 18 apples for every 6 bananas that he consumes.
C) Doris consumes equal numbers of apples and bananas.
D) Charlie consumes more bananas per apple than Doris does.
E) Doris consumes 12 apples for every 2 bananas that she consumes.
Correct Answer:
Verified
Correct Answer:
Verified
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