Suppose that no externalities are generated by the production of chickens. If the price of chickens is equal to private marginal cost of producing chickens, then
A) that price is lower than the price associated with an efficient allocation of resources
B) that price is higher than the price associated with an efficient allocation of resources
C) that price is precisely the price associated with an efficient allocation of resources
D) less than an efficient quantity is being produced
E) more than an efficient quantity is being produced

Question

Quizplus · Accepted Answer

When the price of chickens equals the private marginal cost of producing chickens and there are no externalities, it means that the market is operating efficiently. This is because the price reflects the true cost of production, leading to an efficient allocation of resources where social marginal cost equals private marginal cost.

Suppose That No Externalities Are Generated by the Production of Chickens