Assume That the Supply Curve Is Horizontal Because Marginal Cost

question 32

Multiple Choice

Assume that the supply curve is horizontal because marginal cost is constant at $10.John,Robert,and Jimmy each value one compact disc at $20 but only Jimmy and John value a second compact disc (Jimmy at $5 and John at $15) .If a social planner dictates that two compact discs be produced and distributed to John,Robert,and Jimmy,then even if the compact discs are allocated based on demand,this market will lose out on $___ of value.

• A) $5.
• B) $10.
• C) $15.
• D) There will be no lost value as five compact discs is the efficient level.

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Definitions:

Spectrum of Electromagnetic Energy

The spectrum of electromagnetic energy encompasses all possible frequencies of electromagnetic radiation, ranging from radio waves to gamma rays.

Ultraviolet Light

A type of electromagnetic radiation with a wavelength shorter than that of visible light, but longer than X-rays.

Gamma Waves

A type of brain wave frequency associated with cognitive processing, memory, and learning.

Sensory Adaptation

The mechanism where sensory detectors decrease in sensitivity to unchanging stimuli as time progresses.