Figure 4-7 -Refer to Figure 4-7. the Figure Above Represents the Market

question 356

Multiple Choice

Figure 4-7
-Refer to Figure 4-7. The figure above represents the market for iced tea. Assume that this is a competitive market. At a price of $3,

• A) the marginal cost of iced tea is greater than the marginal benefit; therefore, output is inefficiently low.
• B) producers should lower the price to $1 in order to sell the quantity demanded of 10,000.
• C) the marginal benefit of iced tea is greater than the marginal cost; therefore, output is inefficiently low.
• D) the marginal benefit of iced tea is greater than the marginal cost; therefore, output is inefficiently high.

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Definitions:

Resistance Price

A price level at which an asset meets pressure on its way up due to a concentration of selling interest, often used in technical analysis of financial markets.

Willingness to Pay

The maximum amount an individual or entity is prepared to spend to purchase a good or service or to avoid something undesirable.

Market Demand Curve

A graphical representation of the quantity of goods demanded at various prices by all consumers in the market.

Consumer Surplus

The divergence in the anticipated price for a good or service by consumers and the actual price they pay.