Economists often say that trade is a win-win situation. How do you justify this?
One of the fundamental ideas of economics is that both the parties must expect to gain something in voluntary exchange. Laws sometimes prohibit mutually beneficial exchanges between buyers and sellers?as when the resale of tickets to sporting events is outlawed even though the buyer is happy to get the ticket that he could not obtain at a lower price. In such instances, misguided reasoning blocks the mutual gains that arise from voluntary exchange. No one will voluntarily agree for a trade if they do not expect any benefit from it. So trade is a win-win situation since both parties are going to gain from it.
You might also like to view...
According to the permanent income hypothesis, a temporary increase in income that does not affect average lifetime income would
A) cause no change in consumption. B) cause a decrease in consumption and saving by the same amount. C) cause an increase in consumption and saving by the same amount. D) cause a large increase in consumption.
Which of the following is NOT a criticism of international institutions such as the IMF, the World Bank, or the WTO?
A) They lack openness in their decision-making process. B) They violate national sovereignty by imposing unwanted domestic policies. C) They fail to understand the effects of their policies on the vulnerable. D) Their decision making is biased in favor of underdeveloped nations and against the interests of nations already industrialized. E) They ignore potentially large adjustment costs for developing nations of implementing their policies.
In a two-period model with default, if the market interest rate is low, then
A) default is more likely B) there is no effect on the nation's default decision. C) default is less likely. D) the income effect is larger than the substitution effect.
The chain store paradox of an incumbent who accommodates a finite stream of potential entrants threatening to enter sequentially numerous markets illustrates
a. backwards induction b. the unraveling problem c. subgame perfect equilibrium d. best reply responses e. all of the above