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Joe and Rita each have some milk and cookies (Milk on the horizontal axis). Joe's MRS of cookies for milk is two. Rita's MRS of

Joe and Rita each have some milk and cookies (Milk on the horizontal axis). Joe's MRS of cookies for milk is two. Rita's MRS of cookies for milk is four. Which of the following statements is TRUE?

Question 3 options:

No gains from trade are possible.

Both Rita and Joe can be made better off if Rita gives Joe some cookies in exchange for milk.

Rita and Joe are on the contract curve.

Both Rita and Joe can be made better off if Joe gives Rita some cookies in exchange for milk.

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