Consider Two Resource Markets in Which the Demand Curves Slope

question 83

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)All of the resource earnings in market A are economic rent.
• B)All of the resource earnings in both markets are economic rent.
• C)All of the resource earnings in market B are economic rent.
• D)None of the resource earnings in either market is an opportunity cost.
• E)None of the resource earnings in either market is economic rent.

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Definitions:

Profit-maximizing

Profit-maximizing refers to a strategic approach by businesses to adjust their production and pricing to achieve the highest possible profit.

Perfectly Competitive Firm

A hypothetical business in a market where no single company can influence the market price or product quality, leading to an efficient allocation of resources.

Short Run

A period in economics during which at least one factor of production is fixed, limiting the ability to increase production in response to increased demand.

Profitable

A financial status where the income generated from business activities exceeds the expenses, taxes, and costs associated with maintaining the business.