The size of the zone of agreement measures:
A) the difference between the buyer's marginal benefit and the price.
B) the average of the trading parties' walk-away prices.
C) the difference between the seller's marginal cost and the price.
D) the difference between the buyer's and seller's walk-away values.
E) the excess of producer's surplus over consumer's surplus.

Question

Quizplus · Accepted Answer

The zone of agreement is the range of prices within which a potential agreement can be made between the buyer and seller. The size of the zone of agreement is determined by the difference between the buyer's and seller's walk-away values, which represent the highest prices each is willing to pay or accept. Therefore, the correct answer is D, which states the difference between the buyer's and seller's walk-away values. A is incorrect because it only refers to the buyer's marginal benefit, not the seller's cost. B is incorrect because it only refers to the average of walk-away prices, not their difference. C is incorrect because it only refers to the seller's cost, not the buyer's value. E is incorrect because it refers to producer and consumer surplus, which are not directly related to the zone of agreement.

The Size of the Zone of Agreement Measures