Asked by Mackenzie Vatter on Jul 23, 2024
Verified
If the price of bottled water is $1.00 and the marginal cost of producing it is $1.50,
A) bottled water is being produced in an increasing-cost industry.
B) society will realize a net gain if more bottled water is produced.
C) resources are being overallocated to bottled water.
D) resources are being underallocated to all other goods.
Bottled Water
Packaged drinking water sold in plastic or glass bottles, often purified or spring water, catering to consumer demand for convenient and perceived safe drinking water.
Marginal Cost
The variation in the overall expense that occurs when one more unit is produced, fundamentally representing the expense of manufacturing an extra unit of a product.
Overallocated
A situation in which resources, rights, or goods are distributed in excess of the optimal or desired level, often leading to inefficiency or scarcity in other areas.
- Understand the effectiveness of allocation in perfect competition, characterized by production levels meeting the condition where Price is equal to Marginal Cost.
- Expound on how alterations in market conditions affect supply and demand within distinct industry types (decreasing-cost, increasing-cost, constant-cost).
Verified Answer
RO
Rachel OlivaJul 29, 2024
Final Answer :
C
Explanation :
Resources are being overallocated to bottled water because the marginal cost of producing it ($1.50) is higher than the price it sells for ($1.00), indicating that the resources could be used more efficiently elsewhere.
Learning Objectives
- Understand the effectiveness of allocation in perfect competition, characterized by production levels meeting the condition where Price is equal to Marginal Cost.
- Expound on how alterations in market conditions affect supply and demand within distinct industry types (decreasing-cost, increasing-cost, constant-cost).