Figure: Market Failure (Figure: Market Failure) Look at the figure Market Failure.Suppose it represents the demand and marginal cost of pounds of shrimp in the bay.The additional cost of the shrimp due to the depletion of the common resource is equal to AC.The output of F is because
________.
A)efficient; the marginal benefit is equal to the marginal social cost
B)efficient; the marginal benefit is greater than the marginal social cost
C)inefficient; the marginal benefit is less than the marginal social cost
D)inefficient; the marginal benefit is greater than the marginal social cost

Question

Figure: Market Failure  (Figure: Market Failure) Look at the figure Market Failure.Suppose it represents the demand and marginal cost of pounds of shrimp in the bay.The additional cost of the shrimp due to the depletion of the common resource is equal to AC.The output of F is because
________.
A)efficient; the marginal benefit is equal to the marginal social cost 
B)efficient; the marginal benefit is greater than the marginal social cost 
C)inefficient; the marginal benefit is less than the marginal social cost 
D)inefficient; the marginal benefit is greater than the marginal social cost

Quizplus · Accepted Answer

The point labeled F is inefficient because the marginal benefit of producing pounds of shrimp is less than the marginal social cost. This means that society values the shrimp less than what it costs to produce them, indicating a misallocation of resources and a market failure.

Figure: Market Failure (Figure: Market Failure) Look at the Figure