Use the following to answer question(s): Markets and Efficiency

-(Exhibit: Markets and Efficiency) Using Panel (a), which of the following statements is (are) true?
A) Consumers face a price that bears no relation to marginal cost.
B) Consumers face a price of apples that signals their marginal cost.
C) Consumers will buy apples as long as their marginal cost exceeds their marginal benefits.
D) All of the above statements are true.

Question

Use the following to answer question(s): Markets and Efficiency
 
-(Exhibit: Markets and Efficiency) Using Panel (a), which of the following statements is (are) true?
A) Consumers face a price that bears no relation to marginal cost. 
B) Consumers face a price of apples that signals their marginal cost. 
C) Consumers will buy apples as long as their marginal cost exceeds their marginal benefits. 
D) All of the above statements are true.

Quizplus · Accepted Answer

Panel (a) shows a perfectly competitive market, where price equals marginal cost. Therefore, consumers face a price of apples that signals their marginal cost. Statement A is incorrect because the price does have a relation to marginal cost in a perfectly competitive market. Statement C is incorrect because consumers will buy apples as long as their marginal benefits exceed the price, not marginal cost. Therefore, the only true statement is B.

Use the Following to Answer Question(s): Markets and Efficiency