12. Gains from trade are maximized when
a. consumer surplus is maximized
b. prices are lowest
c. there are no unexploited gains from trade
d.consumers willingness to pay exceeds the cost of production
13. If the price of orange juice increases 11 percent and the quantity demanded decreases by 8 percent, calculate the elasticity of demand.
d. There is not enough information to find the elasticity
14.The price of gasoline has increased. What will happen in the short run and long run in the automobile market?
15 Producer surplus tells us
a. how much producers gain from exchange
b. the equilibrum quantity
c. what consumers are willing to pay
d. the cost of production
16. Which of the following is an example of trade that is beneficial due to preferences differing?
a. will sells Chris vinyl records that he no longer wants
b. Julee trade cookies to joy in exchange for beet chips
c. Jim specialized in electrical work and trades for lawn care services
d. Martha manages a stock portfolio while hiring someone to clean her house
17. A hurricane is approaching Louisiana. Which of the following will lumber sellers do in anticipation?
a. increase the supply of plywood
b. decrease the supply of plywood
c. decrease the price of plywood
d. shutdown until the hurricane has passed
In economics, gains from trade are the net benefits to economic agents .
Gains from trade is maximized when there is no unexploited gains from trade and there is an increase in total social welfare.
Hence, option C is correct.
Option A is not fully correct because increase in only consumer surplus does not guarantee maximum gain from trade.
Option B is only partially correct because to maximize the gains from trade, goods have to be sold by the sellers with the lowest costs. The cost of the seller has to be lowest. It does not say anything directly about the price.
Option D is also only partially correct because it is talking about producer surplus. Both consumer surplus and producer surplus has to be maximized.
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