Consider the market for cheesesteak sandwiches in an economy with the market equ
ID: 1219769 • Letter: C
Question
Consider the market for cheesesteak sandwiches in an economy with the market equilibrium price of $2.50 per cheesesteak sandwich. Suppose that the current price for one cheesesteak sandwich is $1.50. At this price, the market is economically( efficient or Inefficient) because:
a.Some cheesesteak sandwiches produced incur opportunity costs that are less than their marginal benefits to consumers.
b.Some cheesesteak sandwiches produced incur opportunity costs that exceed their marginal benefits to consumers.
c.The opportunity cost of producing the last cheesesteak sandwich equals the marginal benefit of consumption.
2.Which of the following must be true for a market to be able to achieve an efficient outcome? Check all that apply.
a.Firms can freely enter or exit the market without any barriers.
b.The market price is determined solely by the forces of supply of and demand for a good.
c.Every economic player works selflessly to promote the social interest.
Evaluate the following statement: “The pricing system ensures that even the lowest-valued demands are satisfied.” True or False
Explanation / Answer
(1) (a)
When current price is less than equilibrium price, the market is inefficient because for some producers, opportunity cost is lower than marginal benefit.
(2) All 3 options are correct. Fulfillment of all these conditions lead to achieve efficiency.
(3) True.
Pricing system ensures that demand for lower-valued goods is satisfied when a lower price is charged, and demand for higher-valued goods is satisfied when a higher price is charged.