If the price of bottled water is $1.00 and the marginal cost of producing it is $1.50,
A)bottled water is being produced in an increasing-cost industry.
B)society will realize a net gain if more bottled water is produced.
C)resources are being overallocated to bottled water.
D)resources are being underallocated to all other goods.

Question

Quizplus · Accepted Answer

Resources are being overallocated to bottled water because the marginal cost of producing it ($1.50) is higher than the price it sells for ($1.00), indicating that the resources could be used more efficiently elsewhere.

If the Price of Bottled Water Is $1