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Microeconomics: Principles & Policy

14th Edition
William J. Baumol + 2 others
Publisher: Cengage Learning
ISBN: 9781337794992

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BuyFindarrow_forward

Microeconomics: Principles & Policy

14th Edition
William J. Baumol + 2 others
Publisher: Cengage Learning
ISBN: 9781337794992
Chapter 1.A, Problem 5TY
Textbook Problem
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In Figure 8, interpret the economic meaning of points A and B. What do the two points have in common? What is the difference in their economic interpretation?

To determine

To interpret the economic meaning of points A and B. To explain the differences between their interpretation.

Explanation of Solution

The following graph shows the combination of labor hours per day and yards of cloth per day:

Anindifference curve (IC) shows differentcombinations of two goods available to the producerfrom which he/she can producethe same level of output.

Indifference map is shown in the above diagram, where 4 ICs are plotted. This shows the amount of output produced using different combinations of yards of cloth per day and labor hours per day.

IC2 shows all combinations of yards of cloth and labor hours which produces 20 units of output...

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