Comment on the following statement: "Even though the supply of land is perfectly inelastic, the supply of land in a given use may not be fixed."
What will be an ideal response?
The statement is true. When the value of land in one use increases, individuals using land for other purposes may sell their land for the alternative use. For example, if housing developers become more willing to pay for land on which to build new subdivisions, farmers may be willing to give up farmland for the higher price. This increases the supply of land available for housing and lowers the supply of land available for farming.
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The opportunity cost of producing more of one good on a production possibilities frontier is
A) a dollar amount. B) a ratio of quantities. C) a ratio of prices. D) equal to the area inside the production possibilities frontier. E) a theoretical concept which cannot be measured.
Variable inputs are those whose
a. quantity changes as the level of output changes b. costs are irreversible c. quantity remains constant regardless of the level of output d. costs are considered sunk costs e. price is continuously changing