Question

1. Suppose you have more books than you want but would like to have more sporting goods. Explain how your well-being would be affected if a law existed preventing the trading of books for sporting goods. How would such a law affect efficiency in the use of resources? Show how a law banning the sale of books will cause a loss in efficiency.

Answer 1

if there was a law which prevented the trading of books for sporting goods , I would not be able to get the sporting goods i needed in exchange for my books . So for me to get the sporting goods i want i will have to spend more money . And at the same time , my books will be idle .In an efficient market, i would have exchanged my books for the sporting goods i needed. But now my books are idle and i have to spend additional money to get sporting goods causing inefficiency.