Question

Prices below the free market equilibrium are inefficient because the willingness to pay by someone to consume an additional unit ________ the marginal cost to someone for producing that unit. Group of answer choices exceeds equals None of the above; efficiency is defined in terms of natural resources, not market equilibrium. is less than

Answer 1

Answer: is less than

Explanation:

The equilibrium price in a free market economy represents the point where marginal revenue and marginal costs are being maximised.

If the price falls below this level therefore, a situation arises where the marginal cost of producing this good is more than the marginal price that people can pay for this good which would lead to losses.