Question

Consider the following scenario to answer the following questions: Kukla makes tables, with an opportunity cost of 3 rugs per every 4 tables. Zola makes rugs, with an opportunity cost of 2 tables per every 3 rugs. Ollie proposes that Kukla give Zola 2 tables in exchange for 2 rugs. What are Kukla and Zola’s reactions?
A. Neither Kukla nor Zola likes the propoşal.
B. Zola likes the proposal, but Kukla does not.
C. Kukla likes the proposal, but Zola does not.
D. Ollie's proposal is not feasible.
E. Kukla and Zola both like the proposal

Answer 1

Answer:

E

Explanation:

In this question, we are told to state what the reaction of Koka and Zola will be;

Kukla and Zola both like the proposal. As according to the given opportunity cost for Kukla (3 rugs per every 4 tables) she can get 1.5 rugs for 2 tables .But with the offer made now she can get 2 rugs for giving 2 tables.

Given the opportunity cost for Zola ( 2 tables per every 3 rugs ) she must give 3 rugs for getting 2 tables. But with the offer made she can now get 2 tables for giving away only 2 rugs .

So both Kukla and Zola are happy with the offer.

Answer 2

Answer:

C) Kukla likes the proposal, but Zola does not.

Explanation:

Kukla makes tables:

• opportunity cost of 0.75 rugs per table
• opportunity cost or 1.33 tables per rug

Zola makes rugs:

• opportunity cost of 1.5 rugs per table
• opportunity cost of 0.67 tables per rug

Kukla will want to exchange two tables (with an opportunity cost of 2.67 rugs) for two rugs because he (or she?) will gain 0.67 rugs.

Zola will not want to exchange two rugs (with an opportunity cost of 1.33 tables) for two tables because she (or he?) will lose 0.67 tables.