You value your economics textbook at $40. Someone else values it at $30, but that person is willing to pay you $35 for your textbook. Would selling your textbook to this person for $35 be Pareto efficient?

A. Yes, because you received the maximum amount the other person would have been willing to pay for the textbook.
B. Yes, because both of you are better off as a result of the trade.
C. No, because even though he was willing to pay more for the book than he valued it at, you would not receive as much as you value it at, so you would be made worse off.
D. Yes, the person paid you $35 for the book so his net benefit was -$5, whereas your net benefit was also -$5. This exchange is Pareto efficient because each of you have the same net benefit.


Answer: C

Economics

You might also like to view...

What is the change in the money supply when the Fed purchases $100 worth of bonds in a 100-percent-reserve banking system?

Economics

How does human specialization contribute towards increasing an economy's output?

A. It exploits the differences in abilities B. It is a process of creative destruction C. It pushes each worker to master the whole product D. It encourages people to be "jacks-of-all-trades"

Economics

The first systematic attempt to explain the determinants of the price level and national levels of income, employment, consumption and real Gross Domestic Product (GDP) was made by ________ economists

A) supply-side B) classical C) Keynesian D) monetarist

Economics

Monetary policy has a greater impact in an open economy than it does in a closed economy

Indicate whether the statement is true or false

Economics