Tamara and Julio consume only bread and wine.They trade only with each other and there is no production.They both have strictly convex preferences.Tamara's initial endowment of bread and wine is the same as Julio's.
A) At the initial endowment their marginal rates of substitution must be the same.
B) In a competitive equilibrium, the ratio of the two prices must be 1.
C) In a competitive equilibrium, they must consume identical consumption bundles.
D) If they have identical utility functions, then the initial allocation is Pareto optimal.
E) None of the above.
Correct Answer:
Verified
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