Question

According to the principle of voluntary exchange,

A. exchange allows us to take advantage of differences in people's talents and skills.
B. if participation in a market is voluntary and people are well informed, both people in a transaction will be better off.
c. it is more sensible to specialize, doing what we do best and then buying products from other people, who in turn are doing what they do best.
D. All of the above.

Answer 1

The principle of voluntary exchange indicates that free and informed trades in the market benefit both the buyer and seller, support specialization, and utilize diverse talents, which means the correct answer is 'D. All of the above.'

Step-by-step explanation:

The principle of voluntary exchange posits that when an exchange in the market is done freely and with all parties well-informed, both the buyer and seller will benefit. This concept is a core idea in free-market economics and supports the views that:

1. Exchange plays to the strengths of different people's abilities and skills.
2. Both parties in a transaction will be mutually better off.
3. It encourages specialization, where individuals or groups focus on doing what they do best and relying on trade for other needs.

Therefore, the correct answer to the student's question is 'D. All of the above.' When voluntary exchanges occur, they generally do not consider external effects on third parties (externalities), which can sometimes result in negative or positive impacts on those not directly involved in the transaction.