Asked by
Desirea Cabanas
on Oct 14, 2024
Verified
A small economy has only two consumers, Boris and Vanessa.Boris's utility function is U(x, y) x 16y1/2.Vanessa's utility function is U(x, y) x 2y.Boris is endowed with 160 units of x and 60 units of y.They make trades to reach a Pareto optimal allocation of resources in which both persons consume positive amounts.How much y does Boris consume?
A) 32 units
B) 19 units
C) 14 units
D) 16 units
E) There is not enough information to determine how much y he will consume.
Pareto Optimal Allocation
A distribution of resources in which it is impossible to make any individual better off without making at least one individual worse off.
Endowed
Provided with a large amount of a resource or quality, often referring to financial grants given to institutions or individuals.
Units
The basic quantity or measurement, such as meter, kilogram, or liter, in terms of which something is considered or measured.
- Evaluate the effect of starting endowments on how resources are allocated.
Verified Answer
DL
Learning Objectives
- Evaluate the effect of starting endowments on how resources are allocated.