Suppose that Firms A and B each produce high-resolution computer monitors, but Firm A can do so at a lower cost. Cassie and David each want to purchase a high-resolution computer monitor, but David is willing to pay more than Cassie. Which of the following market outcomes is efficient?
A)Firm A produces a monitor that Cassie buys. David does not purchase a monitor.
B)Firm A produces a monitor that David buys.
C)Firm B produces a monitor that Cassie buys. David does not purchase a monitor.
D)Firm B produces a monitor that David buys.

Question

Quizplus · Accepted Answer

Efficiency in this context means that both Cassie and David get the monitor they desire at the lowest possible cost. Since Firm A can produce the monitor at a lower cost, it makes sense for them to produce the monitor that David is willing to pay more for. This ensures that David gets the product he wants, and Cassie can still purchase from the slightly more expensive Firm B at a lower cost than if she had bought from Firm A. Therefore, the market outcome where Firm A produces a monitor that David buys is the most efficient.

Suppose That Firms a and B Each Produce High-Resolution Computer