Franco and Gianni have the same tastes and consume only two goods, wine and pizza.Franco lives in Milano and spends 100,000 lire per week.It costs him 5,000 lire for a bottle of wine and 5,000 lire for a pizza.Gianni lives in Napoli.It costs him 4,000 lire for a bottle of wine and 6,000 lire for a pizza.At those prices, he chooses to buy 10 bottles of wine and 6 pizzas per week.
A)Franco is better off with his own budget than he would be with Gianni's.
B)Gianni is better off with his own budget than he would be with Franco's.
C)Franco and Gianni violate WARP.
D)Franco and Gianni are equally well off.
E)There is not enough information to determine whether either would prefer the other's bundle.

Question

Quizplus · Accepted Answer

Franco can buy 20 bottles of wine or 20 pizzas with his budget. Gianni can buy 25 bottles of wine or 16.67 pizzas with his budget. So Franco is better off with his own budget than he would be with Gianni's.

Franco and Gianni Have the Same Tastes and Consume Only