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The Paradox of Bottled Air

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4)The recently submerged kingdom of Atlantis is populated by identical rational air breathing individuals. The king has decided to give an award to the industry whose product yields the kingdom the most economic value.
Hundreds of industries have entered the competition for the award. The finalists in the competition are the caviar and bottled air industries.
Consumer expenditures on caviar last year were 10 billion shekels while expenditures on bottled air were two billion shekels. Based on this data, the caviar industry argues that the economic benefits of the caviar industry are five times that of the bottled air industry.
As usual, the king is unsure of what to do nd has requested your advice. Using the tools of analysis presented in the course, which industry would recommend receive the award? Explain fully.

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Solution Summary

What bottled air might cost less than caviar in a submerged city.

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The supply curve of an industry is based on the cost to the supplier to bring different quantities of the good to market. The supply curve determines the price level of a good, so prices are based on ...

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