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 produce 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) not accept Joe's offer since she would lose 2 smoothies and 2 salads.
B) accept Joe's offer, as she will be as well off as with no trade.
C) accept Joe's offer since she will gain 4 smoothies and 4 salads.
D) accept Joe's offer since she will gain 4 salads.
E) not accept Joe's offer, as the price he offers is too low for her to gain from trade.
C
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If the quantity of wood purchased decreases when the price of wood rises, a graph representing these variables would have
A) time on the vertical axis. B) the slope on the vertical axis. C) a negative slope. D) a positive slope.
Which of the following pricing practices, if proved, would prove a firm engaged in predatory pricing?
A) The firm sets prices below marginal cost per unit. B) The firm sets prices below sunk cost per unit. C) The firm sets prices below total cost per unit. D) The firm sets prices low enough to drive all its competitors out of business. E) None of the above would prove predatory pricing had occurred.
If the demand for a product is elastic, then a rise in price will
a. cause total spending on the good to increase. b. cause total spending on the good to decrease. c. keep total spending the same, but reduce the quantity demanded. d. keep total spending the same, but increase the quantity demanded.
Connie can clean windows in large office buildings at a cost of $1 per window. The market price for window-cleaning services is $3 per window. If Connie cleans 100 windows, her producer surplus is $200
a. True b. False Indicate whether the statement is true or false