12. Suppose wine production is capital intensive and corn production is labor intensive. An increase in the demand for wine will cause a. an increase in the price of labor relative to the price of capital b. an increase in the price of capital relative to the price of labor c. a reduction in consumer welfare since the price of wine will increase. d. an increase in the marginal cost of corn relative to the marginal cost of wine 13. Suppose an economy produces two goods, corn and wine; the marginal rate of substitution between corn and wine for consumers is 1C/3W; and the marginal rate transformation is 1C/1W. What can be said about the output mix? a. It is inefficient; more corn and less wine should be produced. b. It is inefficient; the economy is operating inside the production possibility frontier c. It is efficient d. It is inefficient; more wine and less corn should be produced 14. If the government imposes a tax to correct the problem associated with a good characterized by external costs, the tax should be equal to a. the marginal social cost of the good b. the marginal external cost of the good c. the amount necessary to generate unitary elasticity of demand d. the marginal private cost of the good