Figure 11-4
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In Figure 11-4, if the cheese industry and the cracker industry have the indicated quantities of capital and labor and are on the indicated production indifference curves, is there the possibility of mutually beneficial trade in inputs? Explain.
What will be an ideal response?
Yes. For the cheese industry, the marginal product of labor is higher than the marginal product of capital; for the cracker industry, the opposite is true. The cheese industry can gain—in the form of lower costs, or higher output for the same cost—by trading capital for labor. The cracker industry can gain in the same way by trading labor for capital.
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a. the owner's own dollars put into the firm. b. the cost of raw materials. c. the cost of labor resource used in production. d. economic rent only. e. the value added at each stage of production.
At the point where the demand and supply curves for a product intersect:
A. the selling price and the buying price need not be equal. B. the market may, or may not, be in equilibrium. C. the quantity that consumers want to purchase and the amount producers choose to sell are the same. D. either a shortage or a surplus of the product might exist, depending on the degree of competition.
In general, it is fair to say that Americans are provided with
A. a greater amount of product differentiation than people in most other countries. B. less amount of product differentiation than people in most other countries. C. about the same amount of product differentiation as people in other countries.
A seller's willingness to sell:
A. is the maximum price that a seller is willing to accept in exchange for a good or service. B. is his or her reserved minimum bid-price. C. is the minimum price that a seller is willing to accept in exchange for a good or service. D. must always equal the buyer's willingness to buy.