When Jessica traded her string cheese for Jamie's apple at lunch, who was made better off as a result of the exchange?

• A. Only Jamie, because she received the string cheese.
• B. Neither, because trades do not affect consumer surplus.
• C. Only Jessica, because she received the apple.
• D. Both Jessica and Jamie, because each received something they valued more than what they gave up.

Answer: (D)

Verified step by step guidance

1. Step 1: Understand the concept of voluntary trade in microeconomics, which states that trades occur only if both parties expect to be better off after the exchange.
2. Step 2: Recognize that Jessica traded her string cheese for Jamie's apple, implying Jessica values the apple more than the string cheese she gave up, and Jamie values the string cheese more than the apple she gave up.
3. Step 3: Define consumer surplus as the difference between what a consumer is willing to pay for a good and what they actually pay; in a trade, both parties gain consumer surplus if they receive something they value more than what they gave up.
4. Step 4: Apply this to the trade: since both Jessica and Jamie voluntarily agreed to the exchange, each must have experienced an increase in their consumer surplus, meaning both are better off.
5. Step 5: Conclude that the correct interpretation is that both Jessica and Jamie are made better off because each received something they valued more than what they gave up, illustrating the mutual benefits of voluntary trade.