Suppose There Are Only Two Goods: Lettuce and Grapes

question 7

Multiple Choice

Suppose there are only two goods: lettuce and grapes.In California,a head of lettuce sells for 50¢ and a bunch of grapes sells for $1.In Nebraska,25¢ must be added to these absolute prices to cover transportation costs.How do these transportation costs affect the relative prices of lettuce and grapes?

• A) The transportation costs do not affect the relative prices of lettuce and grapes.
• B) The relative prices of lettuce and grapes are both higher when transportation costs are added.
• C) The addition of transportation costs makes the relative price of grapes higher and the relative price of lettuce lower.
• D) The transportation costs raise the relative price of lettuce but lower the relative price of grapes.

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Definitions:

Evolution

A scientific theory that explains the diversity of life on Earth through processes such as natural selection and genetic variation.

Development

The process of economic and social transformation that is based on complex cultural and environmental factors and their interactions.

African-American Southerners

This term refers to individuals of African descent living in the Southern region of the United States, historically impacted by slavery and segregation.

Slavery

An arrangement where persons are held by others, stripped of their individual freedom, and obligated to engage in labor or services.