If the price of bottled water is $2 and the marginal cost of producing it is $2.5,
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

When the price of a good is lower than its marginal cost, it indicates that resources are being overallocated to the production of that good, as it costs more to produce than it sells for, leading to inefficiencies in resource allocation.

If the Price of Bottled Water Is $2 and the Marginal