Consider a society consisting of just a farmer and a tailor. The farmer has 30 units of food but no clothing. The tailor has 60 units of clothing but no food. Suppose each has the utility function U = F1/3C2/3
If the price of clothing is always $1, and the food price is currently $1, 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.
A
Economics
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