Joe and Rita Each Have Some Milk and Cookies (Milk

question 70

Multiple Choice

Joe and Rita each have some milk and cookies (Milk on the horizontal axis) .Joe's MRS of cookies for milk is 2.Rita's MRS of cookies for milk is 4.Which of the following statements is TRUE?

• A) No gains from trade are possible.
• B) Both Rita and Joe can be made better off if Rita gives Joe some cookies in exchange for milk.
• C) Rita and Joe are on the contract curve.
• D) Both Rita and Joe can be made better off if Joe gives Rita some cookies in exchange for milk.

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Definitions:

Net Realizable Value

The estimated selling price of goods, minus the costs of their sale or disposal, used in accounting to determine the value of an asset in the balance sheet.

Unrealized Loss

A decrease in the value of an investment or asset that has not been sold, hence the loss has not been realized.

Fair Value Adjustment

A correction made to the reported value of an asset or liability to align it with its market value.

Discounted Note

A debt instrument that is sold or issued for less than its face value and whose return comes from the difference between the purchase price and the face value paid at maturity.