Why Might a Company Use Barter Rather Than Money to Make

question 262

Multiple Choice

Why might a company use barter rather than money to make a trade?

• A)Barter trade is generally more efficient than money-based trade.
• B)Barter can enable two firms to trade when their cash flows are limited.
• C)Money requires a coincidence of wants; barter is more direct.
• D)Money is efficient only for large transactions, so barter is preferred for smaller transactions.

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Definitions:

Externality

A consequence of an economic activity experienced by unrelated third parties, which can be either positive (benefits) or negative (costs).

Gasoline

A highly flammable liquid derived from petroleum, used mainly as fuel in internal combustion engines.

Social Value

The importance or worth that a product, service, or action has to society, including both economic and non-economic factors.

External Benefit

A positive spillover effect of a transaction or activity that benefits a third party not directly involved in the transaction.