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.