Macroeconomics 2nd Edition by Campbell McConnell ,Stanley Brue,Sean Flynn

Exercise 8

Suppose that when the price of gold is $100 an ounce, gold producers find it unprofitable to sell gold. However, when the price is $200, an ounce, 5000 ounces of output (production) is profitable. At $300, a total of 10,000 ounces of output is profitable. Similarly, total production increases by 5000 ounces for each successive $100 increase in the price of gold. Describe the relevant relationship between the price of gold and the production of gold in words, in a table, and on a graph. Put the price of gold on the vertical axis and the output of gold on the horizontal axis. Comment on the advantages and disadvantages of the verbal, tabular, and graphical forms of description.