Consider Two Resource Markets in Which the Demand Curves Slope

question 17

Multiple Choice

Consider two resource markets in which the demand curves slope downward. In market A, the supply curve is horizontal, equilibrium price is $6, and 100 units of the resource are hired. In market B, the supply curve is vertical, equilibrium price is $20, and 30 units of the resource are hired. Which of the following is true?

• A) Total resource earnings are the same in both markets.
• B) Total resource earnings are greater in market A.
• C) Total resource earnings are greater in market B.
• D) There is more economic rent in market A.
• E) There is derived demand in market A, but not in market B.

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Definitions:

Industrial Relations School

A perspective on labor relations emphasizing the importance of institutions, such as unions and labor laws, in shaping work life and labor markets.

Imbalance Of Power

A situation in which there is a disproportionate distribution or exercise of power, often disadvantaging one party in relation to another.

Socialist

an individual who supports or advocates for socialism, a political and economic ideology that seeks to promote social ownership and egalitarian distribution of resources.

Mainstream Press

Refers to traditional media outlets, such as national newspapers and television networks, that reach a large audience and are considered mainstream.