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Unformatted text preview: available resources. c) Point A is inefficient because production is not using all available resources. d) Point B, because it is where the most resources are used to produce capital goods. 2.5) a) Neither country has a comparative advantage producing oil because their opportunity costs of producing oil are equal. b) These countries cannot gain from trade because neither has a comparative advantage producing either good. CHAPTER 4 1.4) Producer surplus is the difference between the lowest price a firm would be willing to accept and the price it actually receives. As the price of a good rises, producer surplus increases, and as the price of a good falls, Producer surplus decreases. 2.5) The statement is incorrect. Consumer surplus (and producer surplus) could increase by Decreasing deadweight loss....
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- Fall '10