The wine industry is currently composed of many firms, and wine is sold in a perfectly competitive market. The wine industry produces the efficient annual output of wine, which is 100,000 bottles per year. The market equilibrium price is $5 per bottle.

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Quizplus · Accepted Answer

The efficient output is the output that maximizes the net benefits to society. In a perfectly competitive market, the market equilibrium price and quantity are the efficient price and quantity because they maximize the net benefits to society. The market demand and supply curves show the relationship between the price of wine and the quantity of wine that consumers are willing and able to buy and the quantity of wine that producers are willing and able to sell. The market equilibrium price and quantity are the point where the demand curve and the supply curve intersect. At this point, the quantity of wine that consumers are willing and able to buy is equal to the quantity of wine that producers are willing and able to sell, and the price of wine is equal to the marginal cost of producing wine. This is the efficient output because it maximizes the net benefits to society.

The Wine Industry Is Currently Composed of Many Firms, and Wine