You Value Your Economics Textbook at $10

question 177

Multiple Choice

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?

• A) No, because you did not receive the maximum amount the other person would have been willing to pay for the textbook.
• B) 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.
• C) Yes, because both of you are better off as a result of the trade.
• D) Yes, because even though you gain from the trade and he loses, there is the potential for you to compensate him for his loss.

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