Answer the following questions true (T) or false (F)
1. Economic efficiency is a market outcome in which the marginal benefit to consumers is equal to the marginal cost of production and the sum of consumer surplus and producer surplus is maximized.
2. If marginal benefit is greater than marginal cost, output is inefficiently high.
3. Deadweight loss refers to the reduction in economic surplus resulting from a market not being in competitive equilibrium.
1. TRUE
2. FALSE
3. TRUE
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Suppose the Christmas trees market is perfectly competitive. A business owner is currently suffering from a loss of $1,000, the cost of producing and selling an additional Christmas tree is $20, and the current market price is $25. The owner
A) should sell more trees. B) should shut down his business now. C) should advertise in the market. D) is already minimizing his loss.
An example of a transaction that will be a surplus item on the U.S. balance of payments is
A) a U.S. resident purchasing French wine. B) a French subsidiary's plant in New Jersey purchasing parts from the main plant in Paris. C) a gift of wheat from the U.S. government to India. D) a tourist from Germany buying a ticket to fly from New York to Chicago on American Airlines.