18. Consider two resource markets, A and B, where the demand curves for the reso

Question

18. Consider two resource markets, A and B, where the demand curves for the resources slope downward. The supply curve of resource A is horizontal, and the supply curve of resource B is vertical. In market A, the equilibrium price is $6 and the equilibrium quantity is 100 units. In market B, the equilibrium price is $20 and the equilibrium quantity is 30 units. Which of the following is true? a. Total resource earnings are the same in both markets. b. Total resource earnings are greater in market B. c. All earnings from resource A are economic rent. d. Total resource earnings are greater in market A. e. All earnings from resource B are its opportunity costs.

Explanation / Answer

a. Total resource earnings are the same in both markets.

total revenue in

Market A=PQ=6*100=600

Market B=PQ=20*30=600

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