Question

Consider the market for hamburgers in an economy where the market equilibrium is characterized by a quantity of hamburgers of 50 million and a price of $5.00 per hamburger. Suppose that currently 50 million hamburgers are being produced and sold at a price of $5.00. This outcome in the market for hamburgers is economically _________ because:

a. The opportunity cost of producing the last hamburger equals the marginal benefit of consumption.
b. Some hamburgers that are valued more highly by consumers than their opportunity cost of production are not being produced and sold
c. Some hamburgers produced incur opportunity costs of production that exceed their value or marginal benefit to consumers.
Which of the following must be true for a market to be able to achieve an efficient outcome?
a. The market price is determined solely by the forces of supply of and demand for a good.
b. Firms can freely enter or exit the market without any barriers.
c. Private property rights are well-defined and enforced.

Answer 1

a. The opportunity cost of producing the last hamburger equals the marginal benefit of consumption.

2. a. The market price is determined solely by the forces of supply of and demand for a good.

Step-by-step explanation:

1. Since all the hamburgers are sold at an equilibrium price of $5 and all the hamburgers are sold, that is clear reflection that the opportunity cost that is the benefit foregone in order to produce the last hamburger = the maximum price that the consumer can pay for buying the additional hamburger, that is marginal benefit.

In that case the producer shall always produce the additional hamburger.

Accordingly the outcome in market is economically efficient.

2. When the price is determined by the forces of supply and demand, that is at a point where the intersection of supply and demand forces takes place, it is the most efficient outcome, as at that price maximum consumers are ready to buy, and also maximum supplies are ready to be done, both are satisfied at their levels.