Figure 5.4
-Refer to Figure 5.4.The figure above represents the market for pecans.Assume that this is a competitive market.If the price of pecans is $3, what changes in the market would result in an economically efficient output?

Question

Figure 5.4 
-Refer to Figure 5.4.The figure above represents the market for pecans.Assume that this is a competitive market.If the price of pecans is $3, what changes in the market would result in an economically efficient output?

Quizplus · Accepted Answer

An economically efficient output is achieved when the quantity supplied is equal to the quantity demanded, which occurs at the equilibrium price of $3 in this case. If the price of pecans is held constant at $3, any increase in demand or decrease in supply would result in a shortage, with quantity demanded exceeding quantity supplied, leading to potential inefficiencies such as rationing or waiting in line for pecans. Conversely, any decrease in demand or increase in supply would result in a surplus, with quantity supplied exceeding quantity demanded, leading to potential inefficiencies such as wasted pecans. Therefore, the only choice that leads to an economically efficient output is D, where an increase in price would decrease quantity demanded and increase quantity supplied, leading to a new equilibrium point with the same price but a higher quantity.

Figure 5.4 -Refer to Figure 5.4.The Figure Above Represents the Market for the Market