When I have both incoming/outgoing calls, I can only hear the other person if the phone is on speaker. It is not muted, or without volume, but the only way I can hear the person on the other end is through speaker.
When did you get the phone? If it is within the return / exchange period then I'd bring it to where you bought it and have them check it out and if the ear piece is dead then have them exchange it.
If your not within the return / exchange period but within the one year warranty I'd get it fixed under warranty.
If your beyond both of those then it may be time for a new phone or you can have it fixed on your dime.
I've seen this as a common problem with the iPhone. It happened to me once with my iphone but it fixed itself... If you're under warranty, I would go to an Apple store and get the phone fixed/replaced.