Use the following to answer question:
Figure: Market Failure
-(Figure: Market Failure)Use Figure: Market Failure.In the figure,the equilibrium price is _____,and the equilibrium quantity is _____ for a competitive market.
A)A;E
B)A;G
C)B;F
D)C;E

Question

Use the following to answer question:
Figure: Market Failure 
-(Figure: Market Failure)Use Figure: Market Failure.In the figure,the equilibrium price is _____,and the equilibrium quantity is _____ for a competitive market.
A)A;E 
B)A;G 
C)B;F 
D)C;E

Quizplus · Accepted Answer

In the figure, the socially optimal quantity is represented by point F, where the demand curve intersects the social marginal cost (SMC) curve. However, the equilibrium quantity is E, where the demand curve intersects the private marginal cost (PMC) curve. This represents a market failure because the market is producing less than the socially optimal quantity. Therefore, choice C (B;F) is the correct answer as it represents the socially optimal quantity.

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