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Questions
ECON 201 Quiz 1: Chs 1 and 2 on Key Ideas & the PPF
Single choice
Mark values his drum set at $800, and Ella values her guitar at $1,000. Suppose that Mark trades his drum set for Ella's guitar.
Options
A.Mark must value Ella's guitar for at least $800, and Ella must value Mark's drum set for at least $1,000.
B.This trade makes Mark better off by $200.
C.This trade decreases total value by moving the guitar and drum away from people who placed a high value on them.
D.This trade makes Ella worse off by $200.
View Explanation
Standard Answer
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Approach Analysis
Consider the setup: Mark values the drum set at 800 and Ella values the guitar at 1000. They trade, so each party exchanges something they own for something the other person owns.
Option 1: 'Mark must value Ella's guitar for at least $800, and Ella must value Mark's drum set for at least $1,000.' This captures the essence of a voluntary trade: each person must perceive the deal as at least as good as what they give up. If Mark values the guitar at 800 or ......Login to view full explanationLog in for full answers
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