Part 1In prison, cigarettes are sometimes used among inmates as a form of payment. All of the following explain how cigarettes solve the "double coincidence of wants" problem, even if a prisoner does not smoke, except: A. cigarettes are widely accepted as a form of payment in prison. B. prisoners can exchange cigarettes for other goods and services. C. cigarettes serve as a medium of exchange. D. exchanging cigarettes for other goods and services increases transaction costs.

Question

Part 1In​ prison, cigarettes are sometimes used among inmates as a form of payment. All of the following explain how cigarettes solve the​ "double coincidence of​ wants" problem, even if a prisoner does not​ smoke, except​: A. cigarettes are widely accepted as a form of payment in prison. B. prisoners can exchange cigarettes for other goods and services. C. cigarettes serve as a medium of exchange. D. exchanging cigarettes for other goods and services increases transaction costs.

BlackTom AI · Accepted Answer

Question restatement: In prison, cigarettes are used as payment. All of the following explain how cigarettes solve the 'double coincidence of wants' problem, even if a prisoner does not smoke, except:

Option A: cigarettes are widely accepted as a form of payment in prison. This explains how cigarettes function as a medium of exchange that others in prison are willing to accept in trade, addressing the double coincidence of wants by providing a common good for barter.

Option B: prisoners can exchange cigarettes for other goods and services. This shows direct use as a general medium of exchange, enabling trades for various needs and thus solving the matching problem between buyer and seller.

Option C: cigarettes serve as a medium of exchange. This is the core idea of money in exchange economies; by serving as a unit of account and a widely accepted medium, it reduces the need for a mutual coincidence of wants.

Option D: exchanging cigarettes for other goods and services increases transaction costs. This statement describes a drawback rather than a mechanism that solves the double coincidence of wants. Increasing transaction costs would make trade harder, not easier, so it does not explain how cigarettes help in trading, and in fact runs counter to the purpose of using a common medium of exchange.

Putting it together, the question asks which option is NOT an explanation for solving the double coincidence of wants with cigarettes. Options A, B, and C each describe a way cigarettes facilitate trade in prison economies as a medium of exchange. Option D describes an outcome that would hinder trade by raising costs, not facilitate it, so it is the exception.

Homework:Chapter 3 Homework

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