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Paulene and Charles, the Only Two People in an Economy

Question 1

Multiple Choice

Paulene and Charles, the only two people in an economy, can spend their time making either herbs or eggs.Each has four hours in total to work.Paulene can make either 36 bunches of herbs and 0 dozen eggs or no herbs and 12 dozen eggs in her four hours.Charles on the other hand can make 16 bunches of herbs if he spends all his time on herb production (and no eggs) or he can make eight dozen eggs in his four hours (and no herbs) .If both parties are going to be willing to trade:


A) The price of a bunch of herbs must be between 1/3 and ½ a dozen eggs.
B) The price of a bunch of herbs must be between 1/2 and a dozen eggs.
C) The price of a bunch of herbs must be between 1 and 2 a dozen eggs.
D) The price of a bunch of herbs must be between 2 and 3 a dozen eggs.
E) The price of a bunch of herbs must be at least 3 dozen eggs.

Correct Answer:

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