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Figure: Market Failure
-(Figure: Market Failure) Look at the figure Market Failure. Suppose it represents the demand for and marginal cost per pound of shrimp in the bay. The additional cost of the shrimp due to the depletion of the common resource is equal to AC. Without government intervention, the market will produce _____ pounds of shrimp.
A) 0
B) E
C) F
D) G

Question

Use the following to answer questions:
Figure: Market Failure 
-(Figure: Market Failure) Look at the figure Market Failure. Suppose it represents the demand for and marginal cost per pound of shrimp in the bay. The additional cost of the shrimp due to the depletion of the common resource is equal to AC. Without government intervention, the market will produce _____ pounds of shrimp.
A) 0 
B) E 
C) F 
D) G

Quizplus · Accepted Answer

The market will produce F pounds of shrimp without government intervention. However, the additional cost of the shrimp due to the depletion of the common resource is equal to AC. This means that the true marginal cost of producing shrimp is F + AC. At this true marginal cost, the market will produce C pounds of shrimp.

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