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.

1. 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. Some hamburgers that are valued more highly by consumers than their opportunity cost of production are not being produced and sold.
b. Some hamburgers produced incur opportunity costs of production that exceed their value or marginal benefit to consumers.
c. The opportunity cost of producing the last hamburger equals the marginal benefit of consumption.

2. 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.

3. Which of the following must be true fora 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

Answer and Explanation:

1. Is economically efficient because the opportunity cost of producing the last hamburger equals the marginal benefit of consumption

the economy is efficient since the equilibrium quantity is exactly produced at the equilibrium price

2 and 3.

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.

The above can all be seen as characteristics of an efficient market. Private property rights is included here since it is one of the bedrocks of capitalist economies which are fundamental for an efficient market