Each of 100 People Receives a Random Item from a Grocery

question 100

Multiple Choice

Each of 100 people receives a random item from a grocery store and assigns it a value between 1 (low) and 10 (high) . They trade those items among themselves for items they prefer rather than those they randomly received and then assign a second value (again, 1 to 10) to the item that they end up with after the trading concludes. How would the sum of those values before trading compare with the sum after trading?

• A) The value would stay the same because no new goods were introduced.
• B) The value would stay the same because no one has a comparative advantage.
• C) After trading, value would be lower because no one can specialize.
• D) After trading, value would be higher because preferences are diverse.

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Definitions:

Income Redistribution

The reallocation of income across a society through mechanisms like taxation, welfare, and public services to achieve economic equity.

Income Distribution

How a nation’s total GDP is distributed amongst its population, affecting the economic welfare of its citizens.

Marginal Utility

The added contentment or utility one gains from using an additional unit of a good or service.

Transferring Income

Transferring income involves reallocating resources or money from one group to another, often through mechanisms like taxation, welfare, or subsidies.