You value your favorite shirt at $100. Someone else values it at $80, and that person is willing to pay you $80 for your shirt. Would selling your shirt to this person for $80 be Pareto efficient?
A. No, the person paid you $80 for the shirt so his net benefit was $0, while your net benefit was -$20. For this change to be Pareto efficient, each of you should have the same net benefit.
B. Yes, because any time you engage in trade, the result must be Pareto efficient.
C. Yes, because even though you lose from the trade and he gains, there is the potential for him to compensate you for your loss.
D. No, because both of you are not better off as a result of the trade.
Answer: D
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Suppose all tickets to the World Series have already been sold. Will any further sales occur if the going price rises?
A) No, and therefore a higher price will have no effect. B) No, but a smaller quantity will be demanded. C) Not unless more tickets are printed. D) Yes, as some ticket-holders sell to others. E) Yes, but the further sales will reduce the price to the original level.
Empirical tests of the theory of comparative advantage have provided
A) strong support for both the Ricardian and Heckscher-Ohlin models. B) mixed support for the Ricardian model and strong support for the Heckscher-Ohlin model. C) strong support for the Ricardian model and mixed support for the Heckscher-Ohlin model. D) mixed support for both Ricardian and Heckscher-Ohlin models. E) no support for either the Ricardian or the Heckscher-Ohlin models.