At any quantity at which the demand curve lies above the supply curve,
A)economic efficiency is achieved
B)the cost of producing the last unit exceeds its value to some consumer
C)marginal cost exceeds the market price
D)the market is Pareto efficient
E)the value of the last unit to some consumer exceeds the cost of producing it

Question

Quizplus · Accepted Answer

When the demand curve lies above the supply curve, it means that there is excess demand in the market. As a result, the value of the last unit to some consumer exceeds the cost of producing it. This implies that there are potential gains from trade that are left unexploited in the market, which results in inefficiencies. Therefore, the best choice is E.

At Any Quantity at Which the Demand Curve Lies Above