Exhibit 13-7 Refer to Exhibit 13-7.If customers are charged 4 cents during the peak period it is:
A) efficient because the marginal benefit is equal to the marginal cost
B) inefficient because marginal cost is greater than the marginal benefit
C) cannot determine
D) none of the above

Question

Exhibit 13-7  Refer to Exhibit 13-7.If customers are charged 4 cents during the peak period it is:
A) efficient because the marginal benefit is equal to the marginal cost 
B) inefficient because marginal cost is greater than the marginal benefit 
C) cannot determine 
D) none of the above

Quizplus · Accepted Answer

If customers are charged 4 cents during the peak period, the price is above the marginal cost of 3 cents, but the marginal benefit is only 3 cents. This means that charging 4 cents during the peak period is inefficient as the marginal cost is greater than the marginal benefit.