Suppose a Seller's Opportunity Cost Matches a Buyer's Valuation of the Product.Assuming

question 23

Multiple Choice

Suppose a seller's opportunity cost matches a buyer's valuation of the product.Assuming a two-person economy, which of the following statements will be true?

• A)The transaction will benefit the buyer, while the seller will neither gain nor lose from it.
• B)The economic value created by this exchange will be zero.
• C)Both parties will be worse-off after the transaction.
• D)The seller will be worse-off than the buyer after the transaction.

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Definitions:

Marginal Revenue Product

The additional revenue generated by employing one more unit of a factor, such as labor, in the production process.

Competitive Industry

A competitive industry is characterized by many firms competing against each other to sell similar or identical products, with few barriers to entry for new firms.

Marginal Revenue Product

The extra income produced by employing an additional unit of a production input.

Marginal Product

The additional output that results from the use of one more unit of a variable input, while other inputs are kept constant.