You value your economics textbook at $10. Someone else values it at $25, and that person is willing to pay you $20 for your textbook. Would selling your textbook to this person for $20 be Pareto efficient?
You value your economics textbook at $10. Someone else values it at $25, and that person is willing to pay you $20 for your textbook. Would selling your textbook to this person for $20 be Pareto efficient?
| No, because you did not receive the maximum amount the other person would have been willing to pay for the textbook. |
| No, the person paid you $20 for the book so his net benefit was only $5, whereas your net benefit was $10. For this change to be Pareto efficient, each of you should have the same net benefit. |
| Yes, because both of you are better off as a result of the trade. |
| Yes, because even though you gain from the trade and he loses, there is the potential for you to compensate him for his loss. |
Looking for a Similar Assignment? Order now and Get 10% Discount! Use Coupon Code "Newclient"
