Suppose That Dwight and Jim Can Either Make Salads or Grill

question 50

Multiple Choice

Suppose that Dwight and Jim can either make salads or grill steaks. Their maximum output per hour is listed in the following table. Given the same quantity of resources, at what terms of trade (relative price ratio) could they specialize and trade so that both consume outside their own production possibilities frontier (PPF) ? $$\begin{array} { | l | l | l | l | l | } \hline & \begin{array} { l } \text { Maximum } \\\text { Number of } \\\text { Salads }\end{array} & \begin{array} { l } \text { Opportunity } \\\text { Cost of 1 } \\\text { Salad }\end{array} & \begin{array} { l } \text { Maximum } \\\text { Number of } \\\text { Steaks }\end{array} & \begin{array} { l } \text { Omportumity } \\\text { Cost of 1 } \\\text { Steak }\end{array} \\\hline \text { Dwight } & 9 & 1 / 3 \text { steak } & 3 & 3 \text { salads } \\\hline \mathrm { Jim } & 12 & 1 / 2 \text { steak } & 6 & 2 \text { salads } \\\hline\end{array}$$

• A) 1 salad per 1 steak
• B) 2 salads per 1 steak
• C) 2.5 salads per 1 steak
• D) 3 salads per 1 steak
• E) 3.5 salads per 1 steak

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Definitions:

Working Capital Investment

Funds invested in the short-term assets of a company, such as inventory and receivables, to support its day-to-day operations.

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The guidelines that a company follows to determine credit limits, terms, and conditions for its customers.

Working Capital Investment

Funds invested in a company's short-term assets, like inventory and accounts receivable, which are necessary for its day-to-day operations.

Accounts Receivable

Amounts owed to a business by customers for goods or services that have been delivered but not yet paid for.