The economic value which can be created by a transaction between ...

[fbq8i]

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.

[bpool94]

Answer to Question 1

D

Answer to Question 2

a