Microeconomics Question

in normal situation, producer should produce to a point where MC = MV
in this case, obviously, they are not equal, i.e. 13=/= 10
the answer is d

HOWEVER, in the question, it does not state that the firm is in wt kind, price-takers or price-searchers, in price-searchers, MV =/= MC still implies efficiency provided the extra gain is smaller than deadweight loss

If extra gain is larger than deadweight, that means Pareto condition is still not attained, and if not all available constraints is provided, it does not mean it is inefficient.

Only if all available constraints are considered and there is extra gain whcih can be captured, it implies inefficiency

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The answer is d.


What the question is telling us is, a product X is only worth $10 to a consumer is actually costing the company $13 to make. So that means the cost of production is actually higher than the consumer is willing to pay. That is why PRODUCTION is being carried out "inefficently."

And since the cost of production of that product X is actually higher than what the consumer is willing to pay, that means not too many people are willing to buy product X. And therefore, COMSUMPTION is being carried out "inefficently."