Use the Following to Answer Questions

question 234

Multiple Choice

Use the following to answer questions:
Figure: Gains from Trade
-(Figure: Gains from Trade) Refer to the figure. What are the total gains from trade at the free market equilibrium?

• A) $1,000
• B) $500
• C) $0
• D) $1,500

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Definitions:

NPV

Net Present Value, a financial metric that calculates the difference between the present value of cash inflows and outflows over a period of time.

Opportunity Cost

The loss of potential gain from other alternatives when one alternative is chosen.

Interest Rate

The cost of borrowing money or the payment received for deposit funds, usually expressed as an annual percentage of the principal.

Wine Barrels

Standardized wooden or metal barrels used for aging, storing, and transporting wine.