Answered: Consider the production and sale of…

Principles of Economics, 7th Edition (MindTap Course List)

7th Edition

ISBN:9781285165875

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter11: Public Goods And Common Resources

Section: Chapter Questions

Problem 2PA

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Consider the production and sale of Good B.

Suppose that the “Social Value” of each unit of Good B is greater than the “Willingness to Pay” of the individual who consumes that unit. There are NO externalities associated with the production or consumption of Good B, and Good B is sold in a competitive market.

Suppose that the “Efficient” level of output for Good B is 400,000 units.

Is the market equilibrium level of output greater than 400,000, less than 400,000, or equal to 400,000 ( just circle your answer; you don’t have to explain)?

Definition Video Formula Definition Phenomenon in which market supply and demand balance each other. Market equilibrium is the economic state in which the market demand curve intersects the market supply curve, giving us the equilibrium price and equilibrium quantity for which a commodity can be sold and purchased in an economy. When market equilibrium is achieved, it suggests that all resources have been allocated efficiently and that there is just a distribution of income and resources in the economy. Video Formula

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