Suppose Joe's MRS for Cookies with Crackers Is 6 Crackers

question 26

Multiple Choice

Suppose Joe's MRS for cookies with crackers is 6 crackers per cookie.Also assume that Mary's MRS for cookies with crackers is 3 crackers per cookie.Assuming that these rates of substitution don't depend on the amounts consumed,which of the following trades would make both Joe and Mary better off?

• A) Joe gives Mary 5 crackers in exchange for a cookie.
• B) Joe gives Mary 2 crackers in exchange for a cookie.
• C) Joe gives Mary 6 crackers in exchange for a cookie.
• D) There is not enough information to answer the question.

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Definitions:

Common Fixed Expenses

Regular, unchanged expenses that a business incurs, regardless of the level of production or sales volume.

Break-even

The point at which total costs and total revenue are equal, indicating that a business makes neither a profit nor a loss.

Sales Dollars

The total revenue generated from goods or services sold by a company, measured in dollar terms.

Common Fixed Expenses

Expenses that remain constant for a business across different projects, products, or divisions and do not change with the level of production or sales.