“If Jones trades a used car to Smith for $5,000, nothing new is created. Thus, there is no way the transaction can improve the welfare of people.” Is this statement true? Why or why not? Economists...

“If Jones trades a used car to Smith for $5,000, nothing new is created. Thus, there is no way the transaction can improve the welfare of people.” Is this statement true? Why or why not?

Economists often argue that wage rates reflect productivity. Yet, the wages of house painters have increased nearly as rapidly as the national average, even though these workers use approximately the same production methods as they did 50 years ago. Can you explain why the wages of painters have risen substantially even though their productivity has changed so little?