In a pure exchange economy with two persons and two goods, one person always prefers more to less of both goods and one person likes one of the goods and hates the other so much that she would have to be paid to consume it.Both are initially endowed with positive amounts of both goods.The competitive equilibrium price of the good that one person hates
A)must be negative.
B)must be smaller than the price of the good both people like.
C)must be less than 1.
D)could be positive or negative, depending on details of tastes and technology.
E)must be positive.

Question

Quizplus · Accepted Answer

The competitive equilibrium price must be positive because prices in a market cannot be negative, and the market must clear with both goods being traded.

In a Pure Exchange Economy with Two Persons and Two