The equity capital of a privately owned firm includes:
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.
a
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What will be an ideal response?
Suppose labor productivity in France is such that one hour of labor is required to produce one gallon of wine while two hours of labor are required to produce one pound of cheese. Assuming the availability of one million labor hours, draw a constant-cost production-possibility curve for France with the quantity of cheese measured along the vertical axis and the quantity of wine on the horizontal axis. If the free-trade price of wine is two pounds of cheese per gallon, show where, with free trade, France will produce on its production-possibilities curve. Then, draw and use a trade line to illustrate how France can gain from free trade.
What will be an ideal response?