The Economic Value Which Can Be Created by a Transaction

question 60

Multiple Choice

The economic value which can be created by a transaction between two people, Ed (seller) and Luis (buyer) , is $50 as Ed's opportunity cost of selling is $135 and Luis' valuation of the good is $185.Suppose Ed and Luis do not speak the same language and Ed hires an interpreter who charges $2 per hour.Ed and Luis finally agree to a price of $160.This implies:

• A)Luis' valuation of the good will increase.
• B)Ed's opportunity cost will decline.
• C)economic value from the transaction will decline.
• D)Ed will receive to a lower benefit than Luis.