Microeconomics 20th Edition by Campbell McConnell, Stanley Brue,Sean Flynn

Exercise 5

Suppose that purely competitive firms producing cashews discover that P exceeds MC. Is their combined output of cashews too little, too much, or just right to achieve allocative efficiency In the long run, what will happen to the supply of cashews and the price of cashews Use a supply and demand diagram to show how that response will change the combined amount of consumer surplus and producer surplus in the market for cashews.