Economics question -- please help!?

Question

Danajaan -- I get that. The trade should lie somewhere between the two opportunity costs. But the question is what's the highest price that benefits both. I don't understand that. Because at a high price for one, the other gets screwed.

Answer 1

poor daanajan, she missed ur trick, its highest price of pizza direction of trade - 2 gallon of root beer

Answer 2

Think about it in terms of whether they would agree to the trade.  If the price is higher than 2/3 (Kris' opportunity cost), he wouldn't agree to the trade, because he'd be better off making his root beer himself.  If the price is lower than 1/2 (Pat's opportunity cost), Pat wouldn't accept it because he'd be better off making the pizza himself.