Economics 12th Edition by William Baumol, Alan S Blinder

Exercise 3

Using the concepts of marginal cost (MC) and marginal utility (MU), discuss the nature of the inefficiency in each of the following cases:
a. An arrangement that offers relatively little coffee and much tea to people who prefer coffee and does the reverse for tea lovers
b. An arrangement in which skilled mechanics are assigned to ditch digging and unskilled laborers to repairing cars
c. An arrangement that produces a large quantity of trucks and few cars, assuming that both cost about the same amount to produce and to run but that most people in the community prefer cars to trucks