Juan McDonald is willing to pay $800 for a new iPad. Apple (the producer of iPads) is selling a new iPad for $700. It costs Apple $400 to produce this iPad. A voluntary economic transaction between Juan and Apple _____ occur because ____ would be better off due to the transaction.
A)will; neither Juan nor Apple
B)will; both Juan and Apple
C)will not; only Juan
D)will not; only Apple

Question

Quizplus · Accepted Answer

Both Juan and Apple would be better off due to the transaction. Juan values the iPad at $800, which is higher than the selling price of $700, so he gains by acquiring the iPad. On the other hand, Apple gains a profit of $300 ($700 selling price - $400 cost of production) by selling the iPad to Juan at a price higher than the cost of production. Thus, both buyer (Juan) and seller (Apple) benefit from the transaction.

Juan McDonald Is Willing to Pay $800 for a New