Erbia can produce either 18 pounds of oranges or 9 pounds of apples an hour, while Glassen can produce either 16 pounds of oranges or 4 pounds of apples an hour. Which of the following terms of trade between apples and oranges would allow both Erbia and Glassen to gain from specialization and exchange?

To maximize utility, why does a consumer consume the combination of goods that equates marginal utility per dollar on the different goods rather than just equating the marginal utility of the different goods?

What will be an ideal response?

The Paradox of Leverage states that:

a. Excessive leverage is really just an illusion. It occurs when companiesmisestimate the value of their assets and equity. b.When a single firm, in isolation, tries to de-lever its balance sheet, the net effect is often for its leverage to rise. c. Leverage is a puzzle (i.e., a paradox) and always will be. d. When a large portion of the market tries to de-lever its balance sheet, asset prices fall, thereby causing leverage to increase (not decrease). e. None of the above.