Use the following to answer question(s): Model of a Competitive Market

-(Exhibit: Model of a Competitive Market) If there are no external benefits or costs, the output at Q will be:
A) larger than is socially desirable.
B) smaller than is socially desirable.
C) efficient.
D) inefficient.

Question

Use the following to answer question(s): Model of a Competitive Market
 
-(Exhibit: Model of a Competitive Market) If there are no external benefits or costs, the output at Q will be:
A) larger than is socially desirable. 
B) smaller than is socially desirable. 
C) efficient. 
D) inefficient.

Quizplus · Accepted Answer

In a competitive market, the market equilibrium will occur where the marginal cost of producing a good or service is equal to the marginal benefit perceived by consumers. This point is represented by the intersection of the supply and demand curves, which occurs at point Q in the exhibit. At this point, the output is efficient because the cost of producing an additional unit (marginal cost) is equal to the benefit that consumers receive from consuming that unit (marginal benefit). Therefore, the best choice is C, as output Q is efficient.

Use the Following to Answer Question(s): Model of a Competitive