(Figure: Peaches and Cream I) Billy Joe's marginal utility of peaches is given by
= C and his marginal utility of cream is given by
= P, where C is cups of cream and P is pounds of peaches. Bobby Sue's marginal utility of peaches is given by
= 2CP, and her marginal utility of cream is given by
= P².
a. Calculate Billy Joe's and Bobby Sue's marginal rate of substitution of peaches for cream.
b. Suppose Billy Joe has 2 cups of cream and 2 pounds of peaches and Bobby Sue has 2 cups of cream and 4 pounds of peaches. Is this allocation Pareto-efficient?
c. Suppose Billy Joe has 1 cup of cream and 5 pounds of peaches and Bobby Sue has 3 cups of cream and 1 pound of peaches. Is this allocation Pareto-efficient?

Question

(Figure: Peaches and Cream I) Billy Joe's marginal utility of peaches is given by

= C and his marginal utility of cream is given by

= P, where C is cups of cream and P is pounds of peaches. Bobby Sue's marginal utility of peaches is given by

= 2CP, and her marginal utility of cream is given by

= P².

a. Calculate Billy Joe's and Bobby Sue's marginal rate of substitution of peaches for cream.
b. Suppose Billy Joe has 2 cups of cream and 2 pounds of peaches and Bobby Sue has 2 cups of cream and 4 pounds of peaches. Is this allocation Pareto-efficient?
c. Suppose Billy Joe has 1 cup of cream and 5 pounds of peaches and Bobby Sue has 3 cups of cream and 1 pound of peaches. Is this allocation Pareto-efficient?

Quizplus · Accepted Answer

The Answer of (Figure: Peaches and Cream I) Billy Joe's marginal utility of peaches is given by = C and his marginal utility of cream is given by = P, where C is cups of cream and P is pounds of peaches. Bobby Sue's marginal utility of peaches is given by = 2CP, and her marginal utility of cream is given by = P². a. Calculate Billy Joe's and Bobby Sue's marginal rate of substitution of peaches for cream. b. Suppose Billy Joe has 2 cups of cream and 2 pounds of peaches and Bobby Sue has 2 cups of cream and 4 pounds of peaches. Is this allocation Pareto-efficient? c. Suppose Billy Joe has 1 cup of cream and 5 pounds of peaches and Bobby Sue has 3 cups of cream and 1 pound of peaches. Is this allocation Pareto-efficient?

(Figure: Peaches and Cream I) Billy Joe's Marginal Utility of Peaches