If the MRS at an initial market basket between books [B] and Frisbees [F] is 6B/1F for Dave and 3B/1F for Diane,then:
A)Diane will accept 3 books from Dave for 1 Frisbee.
B)Diane will accept 2 books from Dave for 1 Frisbee.
C)mutually beneficial trades are not possible.
D)Dave will offer 7 books for 1 Frisbee from Diane.

Question

Quizplus · Accepted Answer

Diane values 1 Frisbee as equivalent to 3 books, so she would accept 3 books from Dave for 1 Frisbee, as it matches her valuation. Dave values 1 Frisbee as equivalent to 6 books, so he is willing to give up to 6 books for 1 Frisbee, making a trade of 3 books for 1 Frisbee beneficial for both.

If the MRS at an Initial Market Basket Between Books