Using the Figure Above,suppose with No Trade Liz and Joe

question 101

Multiple Choice

Using the figure above,suppose with no trade Liz and Joe each produce at point A on their respective PPFs.Then,Joe suggests that they specialize and trade.He would produces only salads and Liz would produce only smoothies.Then,Joe says,he would buy 16 smoothies from Liz at a price of 1.5 salads per smoothie.Liz should

• A) accept Joe's offer since she will gain 4 smoothies and 4 salads.
• B) accept Joe's offer as she will be as well off as with no trade.
• C) not accept Joe's offer as the price he offers is too low for her to gain from trade.
• D) not accept Joe's offer since she would lose 2 smoothies and 2 salads.
• E) accept Joe's offer since she will gain 4 salads.

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Definitions:

Inflation

The rate at which the average cost of goods and services ascends, leading to a decrease in monetary value over time.

Creditors

Individuals or institutions that lend money or extend credit to others, expecting repayment in the future with interest.

Debtors

Individuals or entities that owe money to another entity, typically as a result of borrowing funds.

Business Owners

Individuals who legally possess a company, assume major risks, and enjoy the benefits from its operation and growth.