Suppose the cost of producing cellular phones declines from $25 to $20.If buyers' valuations remain fixed at $30, the transaction would create _____ more economic value.
A)$10
B)$5
C)$2
D)$15

Question

Quizplus · Accepted Answer

The economic value created by a transaction is the difference between the buyer's valuation and the cost of production. Initially, this value is $30 - $25 = $5. After the cost declines to $20, the value becomes $30 - $20 = $10. The increase in economic value is $10 - $5 = $5.

Suppose the Cost of Producing Cellular Phones Declines from $25