Multiple Choice
An economy has two people, Charlie and Doris.There are two goods, apples and bananas.Charlie has an initial endowment of 3 apples and 12 bananas.Doris has an initial endowment of 6 apples and 6 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 9 apples for every 18 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 6 apples for every 6 bananas that she consumes.
Correct Answer:
Verified
Correct Answer:
Verified
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