When Two People Trade

question 145

Multiple Choice

When two people trade,

• A) both of them expect to be made worse off by the exchange.
• B) they are trying to help out each other.
• C) they know one of them will get the better of the other.
• D) they both expect to be made better off by the exchange.

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Definitions:

Diseconomies of Scale

The condition in which a company's costs per unit increase as it produces more units, typically due to inefficiencies that arise with increased size or output.

Diminishing Marginal Returns

A principle stating that as additional units of a variable input are added to a fixed input, the additions to output will eventually decrease.

Law of Diminishing Returns

An economic principle stating that as investment in a particular area increases, the rate of profit from that investment, after a certain point, cannot continue to increase if other variables remain constant.

Total Cost

The aggregate of expenses related to the manufacturing of products or provision of services, which includes costs that stay the same as well as those that vary.