Figure 4-5
-Refer to Figure 4-5. The figure above represents the market for pecans. Assume that this is a competitive market. At a price of $3,
A) the marginal cost of pecans is greater than the marginal benefit; therefore, output is inefficiently low.
B) producers should raise the price to $9 in order to sell the quantity demanded of 12,000.
C) the marginal benefit of pecans is greater than the marginal cost; therefore, output is inefficiently high.
D) the marginal benefit of pecans is greater than the marginal cost; therefore, output is inefficiently low.

Question

Figure 4-5 
-Refer to Figure 4-5. The figure above represents the market for pecans. Assume that this is a competitive market. At a price of $3,
A) the marginal cost of pecans is greater than the marginal benefit; therefore, output is inefficiently low. 
B) producers should raise the price to $9 in order to sell the quantity demanded of 12,000. 
C) the marginal benefit of pecans is greater than the marginal cost; therefore, output is inefficiently high. 
D) the marginal benefit of pecans is greater than the marginal cost; therefore, output is inefficiently low.

Quizplus · Accepted Answer

At a price of $3, the quantity supplied is only 8,000 pounds, which is less than the quantity demanded of 12,000 pounds. This indicates that the marginal cost of producing an additional pound of pecans is higher than the marginal benefit of consuming an additional pound at this price level. As a result, output is inefficiently low. Producers could profitably increase output and lower the price to reach the equilibrium level.

Figure 4-5 -Refer to Figure 4-5. the Figure Above Represents the Market