Suppose that Firms A and B each produce high-resolution computer monitors, but Firm A can do so at a lower cost. Cassie and David each want to purchase a high-resolution computer monitor, but David is willing to pay more than Cassie. If Firm B produces a monitor that David buys, then the market outcome illustrates which of the following principles? (i) Free markets allocate the supply of goods to
the buyers who value them most highly, as measured by their willingness to pay. (ii) Free markets allocate the demand for goods to the sellers who can produce them at the least cost.
a. (i) only
b. (ii) only
c. both (i) and (ii)
d. neither (i) nor (ii)
a
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If there is an increase in demand for a good,
a. there will be an increase in demand for the inputs that produce it. b. there will be a decrease in demand for the inputs that produce it. c. there will be an increase in supply of the inputs that produce it. d. there will be a decrease in supply of the inputs that produce it.
An outcome is considered efficient if
A) it is not possible to make someone better off without making anyone else worse off. B) it is the best available choice for an individual. C) it results in fair shares for everyone involved. D) it is possible to make someone better off without making anyone else worse off.