Economists say that voluntary exchange makes both parties better off. What is the explanation that they offer to back up this conclusion?
This analysis was developed in Chapter 14, "The Case for Free Markets I: The Price System." As long as trade is voluntary rather than coercive, the parties are free not to engage in it. Therefore, they will not lose from trade (else they decide to quit and not trade). At least in prospect, trade must benefit at least one party and cannot worsen the other party.
One nation will give up some of a good that it has much of, and for which the marginal utility is very small, for another good that it has little of, and for which its marginal utility is very high. The other nation does the same. Although the trade does not increase the volume of goods in existence, the trade does increase the utility of the trading partners, and makes at least one better off and the other no worse off.
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A rancher raises shee
A) only the raw wool and the yarn. B) only the yarn and the sweaters. C) the raw wool, the yarn and the sweaters. D) only the sweaters.
The monopolist determines the price and quantity combination that maximizes short-run profits by
A) finding the quantity at which marginal cost and marginal revenue are equal and then using the demand curve to find price. B) determining the price by finding the highest price at which sales can be made and then using the demand curve to find the appropriate quantity. C) finding the point at which marginal revenue and demand intersect. This gives the price and quantity that maximizes profits. D) finding the quantity at which average revenue and average total cost are furthest apart.
Betsy graduates from college, where she earned $3,000 a year working part-time, and takes a job as a third grade teacher, where she now earns $30,000 per year. About the same time she received her first paycheck, her bicycle was stolen. With her old income she would have purchased a new bike but with her new income she purchased a new car. Therefore,
a. bicycles are a normal good for Betsy b. automobiles are an inferior good for Betsy c. automobiles are a normal good for Betsy d. Betsy's supply curve for automobiles is upward-sloping e. bicycles and automobiles are complementary goods for Betsy
When a country that imports shoes imposes a tariff on shoes, buyers of shoes in that country become worse off and sellers of shoes in that country become better off
a. True b. False Indicate whether the statement is true or false