Economists say that voluntary exchange makes both parties better off. What is the explanation that they offer to back up this conclusion?
What will be an ideal response?
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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An economy with an expansionary gap will, in the absence of stabilization policy, eventually experience a(n) ________ in the inflation rate, leading to a(n) ________ in output.
A. decrease; increase B. increase; increase C. decrease; decrease D. increase; decrease
When using expert opinion, consumer surveys, test marketing, and price experiments to analyze consumer behavior, managers must consider how to isolate the effect of different variables that influence demand
Indicate whether the statement is true or false
Which of the following is true?
a. A fall in a good's price leads to a decrease in quantity demanded, illustrated by moving along a demand curve. b. According to the law of demand, other things equal, when the price of a good or service falls, demand increases.c. A change in demand for chocolate bars is caused by a change in the price of chocolate bars d. None of the above is true.
If the economy relies entirely on the market mechanism to answer the WHAT, HOW, and FOR WHOM questions, it tends to
A. Overproduce goods that yield external benefits and underproduce those that generate external costs. B. Underproduce goods that yield external benefits and overproduce those that generate external costs. C. Overproduce goods that yield external benefits and overproduce those that generate external costs. D. Underproduce goods that yield external benefits and underproduce those that generate external costs.