The marginal benefit of an additional beach towel is $12. The marginal cost of producing an additional beach towel is $8. If producers are minimizing the average costs of production, then we can conclude:
A. beach towel production is allocatively efficient than not productively efficient.
B. Beach Tower production is not allocatively efficient but is productively efficient.
C. beach towel production is neither allocatively nor productively efficient
D. beach towel production is both allocatively and productively efficient
Answer- B- Beach towel production is not allocatively efficient but is productively efficient.
Reason- As stated in the question,the producer is minimising its average cost,i.e the producer is producing at the minimum point of Average Cost curve. Therefore,Production is productively efficient.
But,Allocative Efficiency condition is Marginal Benefit=Marginal Cost. In this question,Marginal benefit >Marginal Cost. Therefore,production is Allocatively inefficient.
You might also like to view...
An increase in the income of country A relative to the income of country B will usually lead to ________.
A. an increase in country A's exports to country B B. an increase in country B's imports from country A C. an increase in country B's demand for the currency of country A D. an increase in country A's demand for the currency of country B
Ceveryday expenses is:
A. irrational, since money is fungible. B. rational, since Buddy can now pay all his bills with a small credit card payment each month. C. going to make Buddy wealthier in the long run. D. rational, since he has his new computer and has money in the bank.
With a monopolist's outcome, producer surplus is:
A. higher than that of a competitive market. B. lower than that of a competitive market. C. the same as that of a competitive market. D. Any of these is possible.
Country X and Country Y produce scud missiles and wheat. Country X has a comparative advantage in the production of scud missiles while Country Y has a comparative advantage in wheat. Present an argument f or and against free trade between these two countries