Use the Table Below to Choose the Correct Answer

question 203

Multiple Choice

Use the table below to choose the correct answer.The table outlines the production possibilities of Robinson Crusoe and Joe Friday.

If Crusoe and Friday want to maximize their consumption possibilities,

• A)Crusoe should specialize in producing good X and Friday in producing good Y,but no trade should be allowed.
• B)Crusoe should specialize in producing good X and Friday in producing good Y;trade should occur to maximize joint consumption.
• C)Crusoe should specialize in producing good Y and Friday in producing good X;trade should occur to maximize joint consumption.
• D)Not enough information is provided to conclusively answer this question.

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Definitions:

Interest Rate

The percentage of a loan charged to the borrower as interest, usually presented as an annual rate of the remaining loan balance.

Present Value

The calculated present value of a prospective sum of money or cash flow stream, utilizing a given rate of return.

Land

In economics, land refers to all natural resources used to produce goods and services, including not just real estate but also agricultural land, forests, and mineral resources.

Demand

The amount of a product or service that buyers are ready and capable of buying at different price levels over a specific period.