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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Definitions:

Individual Agency

The capacity of individuals to act independently and make free choices, shaping their own lives.

Social Fact

Elements such as norms, values, and structures that exist external to the individual and exert influence over them, as defined by sociologist Émile Durkheim.

Émile Durkheim

A founding figure in sociology known for his work on social cohesion, collective conscience, and the study of social facts as phenomena external to individuals.

Collective Conscience

A set of shared beliefs, ideas, and moral attitudes which operate as a unifying force within society.