Homework: Chapter 4 Homework Score: 0 of 1 pt 4.2-18 The fgure to the right repr

Question

Homework: Chapter 4 Homework Score: 0 of 1 pt 4.2-18 The fgure to the right represents the market for pecans. Assume thst this is a compettive market At a quantity of 12.000 O A. the marginal benefit of pecans is greator than the marginal cost, therefore, output is ineiciently high ??. producer, should raise he price to S9 n order to sel te quantty demanded of 12.000. C. the marginal cost of pecans is greater than the marginal beneit: therefire, output is ineficiently hight marginal cost, therefore, output s ineficiently low O D. the marginal beneft of pecans is greater than the

Explanation / Answer

The answer to the above question is C. At the quantity of 12000, quantity supplied exceeds the quantity demanded. As it is a competitive market structure, the downward sloping demand curve represents the marginal benefit derived by the consumers and the upward sloping supply curve represents the marginal cost curve. Thus for the quantity of 12000, Marginal cost of pecans is greater than the marginal benefit and therefore the output is inefficiently high and can be corrected by moving leftwards to the intersection of the two curves.

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