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 produces 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) accept Joe's offer since she will gain 4 smoothies and 4 salads.
B) accept Joe's offer as she will be as well off as with no trade.
C) not accept Joe's offer as the price he offers is too low for her to gain from trade.
D) not accept Joe's offer since she would lose 2 smoothies and 2 salads.
E) accept Joe's offer since she will gain 4 salads.
A
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