Multiple Choice
Consider a society consisting of just a farmer and a tailor.The farmer has 10 units of food but no clothing.The tailor has 40 units of clothing but no food.Suppose each has the utility function U = F1/2C1/2.If the price of clothing is always $1,and the food price is currently $3,then we can conclude
A) the market is at a competitive equilibrium.
B) the price of food will drop towards a competitive equilibrium.
C) the price of food will increase towards a competitive equilibrium.
D) None of the above.
Correct Answer:
Verified
Correct Answer:
Verified
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