The economic value which can be created by a transaction between two people, Ed (seller) and Luis (buyer), is 50 as Ed's opportunity cost of selling is 135 and Luis' valuation of the good is 185 . Suppose Ed and Luis do not speak the same language and Ed hires an interpreter who charges 2 per hour. Ed and Luis finally agree to a price of 160 . This implies:
a. Luis' valuation of the good will increase.
b. Ed's opportunity cost will decline.
c. economic value from the transaction will decline.
d. Ed will receive to a lower benefit than Luis.
Question 2
As the output produced by a firm increases, the average fixed cost:
a. continues to decline.
b. initially increases, and then declines.
c. quickly drops to zero.
d. becomes constant.
e. declines and finally becomes negative.
Faith Ringgold, God Bless America, No. 13 from the series American People.
Economic and Social Development
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