Reference: Ref 10-3 (Figure: Efficient Market Outcome) Refer to the figure. Which point represents the efficient equilibrium?
A) A
B) B
C) C
D) None of the answers is correct.

Question

Reference: Ref 10-3 (Figure: Efficient Market Outcome) Refer to the figure. Which point represents the efficient equilibrium?
A) A 
B) B 
C) C 
D) None of the answers is correct.

Quizplus · Accepted Answer

Point C represents the efficient equilibrium where the market price (P) intersects with the marginal cost (MC) curve. At this point, the quantity of output produced (Q) is the socially optimal level and the price reflects the true cost of production. Point A represents a situation where the price is too high and point B represents a situation where the price is too low, both resulting in a market inefficiency.

Reference: Ref 10-3 (Figure: Efficient Market Outcome) Refer to the Figure