Mark values his drum set at $800 and Ella values her guitar at $1,000. Suppose that Mark trades his drum set for Ella's guitar.
A) This trade makes Ella worse off by $200.
B) This trade makes Mark better off by $200.
C) Mark must value Ella's guitar for at least $800, and Ella must value Mark's drum set for at least $1,000.
D) This trade decreases total value by moving the guitar and drum away from people who placed a high value on them.

Question

Quizplus · Accepted Answer

For a voluntary trade to occur, both parties must place greater value on the other party's good than on their own. In this case, Mark values Ella's guitar at least as much as his own drum set, and Ella values Mark's drum set at least as much as her own guitar. Therefore, both parties must have valued the other's good for at least $800 and $1000, respectively.

Mark Values His Drum Set at $800 and Ella Values