How does this make sense? I put $20 in a …

Business Questions

How does this make sense? I put $20 in a box, and so do you. The box now contains $40, yet I sell it to you for $30, and we both walk away with a $10 profit.

Short Answer

Both participants initially invest $20 each, totaling $40 for a shared resource. After selling the box for $30, each person ends up with $10 less than their original investment, resulting in a loss of $10 for both and no profit from the transaction.

Step-by-Step Solution

Step 1: Initial Contributions

Both participants start by investing an equal amount of money. Initially, each person contributes $20 to create a shared resource, leading to a combined total of $40. This sets the foundation for the upcoming transaction and represents their initial stake in the box.

Step 2: Selling the Box

The box is sold for $30 to one person, who now effectively owns the box containing their original $20 contribution along with the other person’s contribution. The buyer has exchanged $30 for the box but has, in reality, taken on a financial burden since they spent more than their initial investment.

Step 3: Post-Transaction Positions

After selling the box, neither participant benefits financially. Here’s the breakdown of their financial status:

  • Person A ends up with their original $20 in the form of cash but incurred a loss of $10 since they had put $20 in the box.
  • Person B retains their original $20, but after paying $30 for the box, they also experience a loss of $10.

In conclusion, both participants are effectively $10 down with no profit made in the transaction.

Related Concepts

Initial Contributions

The amount of money that each participant invests at the beginning to create a shared resource, establishing their stake in the transaction.

Selling The Box

The act of exchanging the box for a set amount of money, leading to a change in ownership and financial consequences for the buyer.

Post-Transaction Positions

The financial status of each participant after the transaction has occurred, highlighting any losses or gains that result from the exchange.

Scroll to Top