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:

Affects

Influences or changes caused by one factor on another within a business or system.

Accounts

Records within financial accounting that are used to keep track of increases or decreases in specific financial components, like assets, liabilities, equity, revenue, and expenses.

Dividends Declared

Dividends Declared are profits that a company's board of directors has decided to distribute to shareholders, but which have not yet been paid out.

Increase

An uptick in size, number, value, or strength.