Question

Individuals living in the state of Nebraska like to consume both soybeans and blueberries. While it is possible for farmers to grow both crops in Nebraska, almost no farmers elect to use their land to grow blueberries. Instead, every year, Nebraska exports soybeans and imports blueberries from nearby Michigan, where growers specialize in blueberries.

Which of the following principles of economic interaction best describes this scenario?

Trade can make everyone better off.
There is a tradeoff between equality and efficiency.
All costs are opportunity costs.
When markets do not achieve efficiency, government intervention can improve overall welfare.

Answer 1

Explanation:This scenario best describes the principle of "Trade can make everyone better off."

In this case, Nebraska farmers specialize in growing soybeans and exporting them, while Michigan farmers specialize in growing blueberries. By specializing in what they are good at and trading with each other, both states can benefit from the exchange of goods. Nebraska gets to consume blueberries without having to use resources to grow them, and Michigan gets to consume soybeans without having to use resources to grow them. This allows both states to produce more goods and services than they could if they tried to grow everything themselves. By trading with each other, everyone is better off.