Price theory

| January 28, 2015

Suppose there are two individuals, Casey and Rick, who live in a very simplified world where only two goods are produced and consumed: fruit and vegetables. The production opportunity cost for Casey is 6.00 kilograms of fruit for every kilogram of vegetables. Rick has a production opportunity cost of 4.00 kilograms of fruit for every kilogram of vegetables Eventually Casey realizes that through trade, both individuals can be better off and Rick is willing to trade. What price can be settled between these two parties such that both individuals can enjoy more of fruit and vegetables?

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