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

question 76

Multiple Choice

Using the figure above,suppose with no trade Liz and Joe each produce at point A on their respective PPFs.Then,Liz suggests that they specialize and trade.She would produces only smoothies and Joe would produce only salads.Then she would sell 10 smoothies to Joe at a price of 2.5 salads per smoothie.In this scenario,

• A) Liz gains 10 smoothies and 5 salads, and Joe gains 5 smoothies.
• B) Liz gains 5 smoothies, and Joe gains 10 smoothies.
• C) Liz gains 10 smoothies, and Joe loses 5 smoothies.
• D) Liz gains 5 smoothies and 5 salads, and Joe loses 5 salads.
• E) None of the individuals gains from trade.

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Definitions:

Linear Equation

An algebraic equation that represents a straight line, typically in the form y = mx + c, where m is the slope and c is the y-intercept.

Graphical Method

A visual representation technique, often used in operations research and management to solve linear programming problems and analyze data.

Maximizing Problems

Issues or scenarios in optimization where the goal is to find the maximum value of a function subject to certain constraints, often encountered in mathematics and economics.

Constraints

Restrictions that limit the degree to which a manager can pursue an objective.