($ per hour) $20 Supply $16 $15 $14 $10 Demand Quantity (millions of hours) 8. 10 12 a. At 10 million hours, what is the size of total economic surplus in this market? Label the area representing total economic surplus on the graph. b. At 8 million hours, what is the size of total economic surplus in this market? Label the area representing total economic surplus on the graph. c. Is total economic surplus at 8 million hours larger or smaller than at 10 million hours? Label the area on the graph representing the difference in economic surplus. What is this area called? d. Between 8 million hours and 10 million hours, which of the following is true? The marginal benefit to households exceeds the marginal cost to child-care providers or the marginal cost to child-care providers exceeds the marginal benefit to households. e. Repeat parts b-d for 12 million hours instead of 8 million hours. f. What is the efficient quantity of hours in this market?

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Comparative Advantage and Absolute Advantage Analysis

The theory of absolute advantage was given by Adam Smith in the year 1776.