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(A_C, B_C)=A_CB_C, where A_C is his apple consumption and B_C is his banana consumption.Doris's utility function is U(A_D, B_D)=A_DB_D, where A_D and B_D 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.

Question

Quizplus · Accepted Answer

The Answer of 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(A_C, B_C)=A_CB_C, where A_C is his apple consumption and B_C is his banana consumption.Doris's utility function is U(A_D, B_D)=A_DB_D, where A_D and B_D 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.

An Economy Has Two People, Charlie and Doris