Question

Which is the Correct Answer If the price of bottled water is $1.50 and the marginal...

Which is the Correct Answer

If the price of bottled water is $1.50 and the marginal cost of producing it is $1.00

A. Bottled water is being produced in an increasing-cost industry

B. Society will realize a net gain of less bottled water is produced

C. Resources are being underallocated to bottled water

D. Resources are being overallocated to all other goods

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Homework Answers

Answer #1

Solution:-

Given that

If the price of bottled water is $1.50 and the marginal cost of producing it is $1.00

Option C is correct answer

C)  Resources are being underallocated to bottled water

The marginal cost is equal to the price in an efficient market and in the imperfect market, it is below it but here it no one gaining producing at

Marginal cost < Price

so the resources are being underallocated to bottled water.

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