Suppose That Firms a and B Each Produce High-Resolution Computer

question 157

Multiple Choice

Suppose that Firms A and B each produce high-resolution computer monitors, but Firm A can do so at a lower cost. Cassie and David each want to purchase a high-resolution computer monitor, but David is willing to pay more than Cassie. Which of the following market outcomes is efficient?

• A)Firm A produces a monitor that Cassie buys. David does not purchase a monitor.
• B)Firm A produces a monitor that David buys.
• C)Firm B produces a monitor that Cassie buys. David does not purchase a monitor.
• D)Firm B produces a monitor that David buys.

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Definitions:

Marginal Cost Curve

A graphical representation showing how the cost of producing one more unit changes as production levels change.

MR Curve

Stands for Marginal Revenue Curve, which shows how the revenue changes with the sale of one additional unit of a product.

Profit-Maximizing

The approach a company takes to determine the most profitable pricing and output combination.

Deadweight Loss

An inefficiency in the market that occurs when supply and demand are out of balance, resulting in lost economic opportunity.