When There Is Market Failure So That a Market Produces

question 166

Multiple Choice

When there is market failure so that a market produces less than the efficient amount,

• A) consumer surplus definitely is larger than when the efficient quantity is produced.
• B) the sum of producer surplus and consumer surplus is larger than when the efficient quantity is produced.
• C) there is a deadweight loss.
• D) consumers definitely lose and producers definitely gain.
• E) consumers definitely gain and producers definitely lose.

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Definitions:

Perfect Competitor

An idealized market structure in which many firms sell identical products, there is free entry and exit, and all buyers and sellers are fully informed, leading to efficient outcomes.

MC = MR

In economics, the principle that profit maximization occurs when marginal cost (MC) equals marginal revenue (MR), guiding firms in their production decisions.

Telecommunications Act

Legislation enacted to regulate the telecom industry, often aimed at promoting competition, innovation, and consumer protection.

Wholesale Rates

Prices charged for goods in large quantities, typically lower than retail prices and offered to retailers or other businesses rather than individual consumers.