Robert needs to raise $100,000 to pay for an operation that will save his wife's life. The only way he can raise the money is to sell one of his kidneys to a wealthy man in need of a kidney transplant. This is an example of a trade that:
A. may benefit each party but may not be permitted in a society that believes selling body parts is morally wrong.
B. would never be permitted in any society.
C. may benefit each party but cannot be considered efficient.
D. should be permitted as long as each party enters into the agreement voluntarily.
Answer: A
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The principle of diminishing marginal utility can be used to explain why
A) Bob's second soda is less enjoyable than his first soda. B) Bob's first soda is less enjoyable than his second soda. C) Charlie enjoys his fourth soda less than Bob enjoys his first. D) Bob enjoys his first soda more than Charlie enjoys his fourth.
An example of a market subject to adverse selection would be:
A. the used car market. B. the insurance market. C. the financial market. D. All of these statements are true.
Adverse selection:
A. occurs after the parties have entered into an agreement. B. is about the actions of people. C. results from unobserved characteristics of people or commodities. D. All of these statements are true.
"He who pays a tax should receive the benefit from the expenditure financed by the tax." This statement reflects which of the following principles for a tax?
A. fairness of contribution B. ability-to-pay C. benefits-received D. efficiency