In a free market when there are unexploited gains from trade:
A) the market is slow to adjust to this situation.
B) there are sellers who are unwilling to sell at prices buyers are willing to pay.
C) there are buyers who are willing to pay more for goods than sellers are asking.
D) an equilibrium price and quantity have been reached.

Question

Quizplus · Accepted Answer

Unexploited gains from trade mean that there are potential buyers who are willing to pay a higher price for a good than what the seller is currently asking for. This means that there is excess demand in the market, which should result in a rise in prices until an equilibrium is reached. Option A is incorrect because the market should adjust to this situation, rather than being slow to adjust. Option B is incorrect because sellers would be willing to sell at the higher prices, as they would stand to benefit. Option D is incorrect because an equilibrium price and quantity have not been reached in this situation.

In a Free Market When There Are Unexploited Gains from Trade