Consider a price-controlled good allocated to consumers on a first-come,first-served basis.Consumers end up waiting in line to purchase the good,and this:
A)is more efficient,the higher the opportunity cost of the consumers' time in line.
B)is more equitable than handing out coupons.
C)is less efficient,the higher the opportunity cost of the consumers' time in line.
D)is less equitable than handing out coupons.

Question

Quizplus · Accepted Answer

As the opportunity cost of the consumers' time in line increases, the waiting time becomes more costly, and hence the allocation method becomes less efficient. This is because the time spent waiting in line could have been used for other productive activities, and the cost of waiting exceeds the benefits of receiving the price-controlled good at a lower price. Therefore, the best choice is C, which states that the first-come, first-served allocation method is less efficient as the opportunity cost of time in line increases.

Consider a Price-Controlled Good Allocated to Consumers on a First-Come,first-Served