Which of the following best describes voluntary exchange in economics?

• A. A transaction that occurs only when one party has a monopoly over the market.
• B. An exchange that happens without any negotiation or agreement between the parties involved.
• C. A transaction where both parties freely agree to trade goods or services, believing they will be better off after the exchange.
• D. A situation where the government forces individuals to trade goods or services.

Answer: (C)

Verified step by step guidance

1. Understand the concept of voluntary exchange: it refers to a transaction where both parties willingly agree to trade goods or services because they expect to benefit from the exchange.
2. Recognize that voluntary exchange requires mutual consent and the absence of coercion or force; both parties must believe they will be better off after the trade.
3. Eliminate options that involve monopoly power, lack of negotiation, or government compulsion, as these contradict the idea of free and willing agreement.
4. Focus on the option that highlights free agreement and mutual benefit, which aligns with the economic definition of voluntary exchange.
5. Conclude that voluntary exchange is best described as a transaction where both parties freely agree to trade goods or services, expecting to improve their situation.