# ge%20pbms - and Philip has the utility func-tion U ( b , w...

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ge pbms Multiple Choice Identify the choice that best completes the statement or answers the question. ____ 1. An economy has two people, Charlie and Doris. There are two goods, apples and bananas. Charlie has an ini- tial endowment of 6 apples and 4 bananas. Doris has an initial endowment of 12 apples and 2 bananas. Charlie’s utility function is U ( A C , B C ) = A C B C , where A C is his apple consumption and B C is his banana con- sumption. Doris’s utility function is U ( A D , B D ) = A D B D , where A D and B D are her apple and banana consump- tions. At every Pareto optimal allocation, a. Charlie consumes the same number of apples as Doris. b. Charlie consumes 18 apples for every 6 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 12 apples for every 2 bananas that she consumes. ____ 2. In Problem 1, suppose that Morris has the utility function U ( b , w ) = 4 b + 12 w

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Unformatted text preview: and Philip has the utility func-tion U ( b , w ) = bw . If we draw an Edgeworth box with books on the horizontal axis and wine on the vertical axis and if we measure Morriss consumptions from the lower left corner of the box, then the contract curve contains a. a straight line running from the upper right corner of the box to the lower left. b. a curve that gets steeper as you move from left to right. c. a straight line with slope passing through the lower left corner of the box. d. a straight line with slope passing through the upper right corner of the box. e. a curve that gets flatter as you move from left to right. 3. In Problem 1, can you solve for the equilibrium prices and quantities? If not, what additional information do you need? ge pbms Answer Section MULTIPLE CHOICE 1. ANS: B PTS: 1 DIF: 2 2. ANS: D PTS: 1 DIF: 3 3. look at pp 576-77 of text and follow method...
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## This note was uploaded on 08/25/2009 for the course ECON 302 taught by Professor Toossi during the Spring '08 term at University of Illinois at Urbana–Champaign.

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ge%20pbms - and Philip has the utility func-tion U ( b , w...

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