Topic: General Equilibrium
additional ounce of milk. Rita is willing to trade 4 cookies for an additional ounce of milk. If trading is possible, which of the following is most likely to occur?
A) Joe will give some milk to Rita in exchange for cookies.
B) Rita will give some milk to Joe in exchange for cookies.
C) No trade will take place since they both prefer to have more milk and fewer cookies.
D) There is not enough information to make any predictions.
A) No gains from trade are possible.
B) Both Rita and Joe can be made better off if Rita gives Joe some cookies in exchange for milk.
C) Rita and Joe are on the contract curve.
D) Both Rita and Joe can be made better off if Joe gives Rita some cookies in exchange for milk.
A) marginal rates of substitutions differ across people.
B) marginal rates of substitution are equal across people.
C) indifference curves are convex.
D) people find themselves on the contract curve.
5) Moving away from the contract curve will
A) harm both parties.
B) harm only one of the parties.
C) harm at least one of the parties.
D) harm neither of the parties.