Use the production possibilities data below for Mike and Sarah to answer the fol

Question

Use the production possibilities data below for Mike and Sarah to answer the following question(s).

Table: PPF

Mike

Food

Clothing

0

20

10

10

15

5

20

Sarah

(M) Refer to the PPF table.. Which of the following would be a mutually agreeable rate of exchange for food?

a. 0.5 units of clothing < price of food < 1 unit of clothing

b. No exchange rate would be mutually agreeable.

c. 1.5 units of clothing < price of food < 2 units of clothing

d. 1 unit of clothing < price of food < 2 units of clothing

Food

Clothing

0

20

10

10

15

5

20

Explanation / Answer

d. 1 unit of clothing < price of food < 2 units of clothing

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