Dale is a guitar teacher and Terrence is a tile layer. If Dale teaches Terrence's daughter to play the guitar in exchange for Terrence tiling Dale's kitchen floor,

Question

a. only Terrence is made better off by trade.
b. both Dale and Terrence are made better off by trade.
c. neither Dale nor Terrence are made better off by trade.
d. only Dale is made better off by trade.

Answer 1

The correct answer is: b. both Dale and Terrence are made better off by trade.

In this scenario, Dale benefits from having his kitchen floor tiled, while Terrence benefits from his daughter learning to play the guitar. Both parties receive a service that they value, resulting in mutual gains from the trade.