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Question
Figure 4-3
Figure 4-3 shows the market for tiger shrimp. The market is initially in equilibrium at a price of $15 and a quantity of 80. Now suppose producers decide to cut output to 40in order to raise the price to $18.
Refer to Figure 4-3. At a price of $18 consumers are willing to buy 40pounds of tiger shrimp. Is this an economically efficient quantity?
A) No, the marginal benefit of the 40th unit exceeds the marginal cost of that 80th unit.
B) Yes, otherwise consumers would not buy 40 units.
C) Yes, because $18 shows what consumers are willing to pay for the product.
D) No, the marginal cost of the 40th unit exceeds the marginal benefit of the 40th unit.
Answer
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