A small economy has only two consumers, Harold and Irene. Harold's utility function is U(x, y)
. Irene's utility function is U(x, y) = x + 5y. Harold is endowed with 500 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 Harold consume?
A) 50 units
B) 25 units
C) 28 units
D) 23 units
E) There is not enough information to determine how much y he will consume.
Correct Answer:
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