Question

14. The pricing system Consider the market for hamburgers in an economy where the market equilibrium is characterized by a quantity of hamburgers of 50 million and a price of $5.00 per hamburger. Suppose that currently 80 million hamburgers are being produced and sold at a price of $2.50. This outcome in the market for hamburgers is economically ▼ because: O The opportunity cost of producing the last hamburger equals the marginal benefit of consumption. O Some hamburgers produced incur opportunity costs of production that exceed their value or marginal benefit to consumers Which of the following must be true for a market to be able to achieve an efficient outcome? Check all that apply. Private property rights are well-defined and enforced Firms can freely enter or exit the market without any barriers. Every economic player works seliflessly to promote the social interest. Evaluate the foliowing statement. True or False: The pricing system ensures that even the lowest-valued dermands are satisfied. True False Evaluate the following statement True or False: When that could have been produced with those same resources an entrepreneur earns a profit, this indicates that the value of the good or service produced exceeds the value of the other items True False

Answer 1

Q = 50 million

P = $5

Qs = 80 million

P = 2.5

The outcome is economically inefficient because too much is produced. And that is why the opportunity cost is higher than the value of the produced output. Thus the correct option is (b).

Efficient outcomes are the one which are obtained when we are in a perfectly competitive set up and the transactions costs are zero and there is perfect symmetric information.

Thus the correct option are: (1) Private property rights are well defined and enforced.

(2) Firms can freely enter and exit without barriers.

With workers working to maximize social interest then the market outcome is compromised and is not efficient.

False: The pricing system ensures that even the lowest valued demands are satisfied. The pricing system only satisfies those demands where the marginal cost of producing the good equals the marginal value obtained from that good’s consumption.

True. The profit is earned when the value of the good or service is greater than the value of what the same resources or budget can produce alternatively.