Asked by
Rachael McCoy
on Dec 01, 2024
Verified
A small economy has only two consumers, Charlie and Doreen.Charlie's utility function is U(x, y) = x + 154y1/2.Doreen's utility function is U(x, y) = x + 7y.At a Pareto optimal allocation in which both individuals consume some of each good, how much y does Charlie consume?
A) 121
B) 9
C) 22
D) 18
E) We can't tell without knowing the initial endowments.
Pareto Optimal
A resource allocation condition wherein it is infeasible to make improvements for any individual or preference without imposing disadvantages on at least one other.
- Gain insight into the role of homothetic and Cobb-Douglas preferences in determining consumption distributions.
- Acquire insight into how initial allocations influence the distribution of resources in pure exchange economies.
Verified Answer
ET
Learning Objectives
- Gain insight into the role of homothetic and Cobb-Douglas preferences in determining consumption distributions.
- Acquire insight into how initial allocations influence the distribution of resources in pure exchange economies.