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Figure 4-3

Figure 4-4 shows the market for tiger shrimp. The market is initially in equilibrium at a price of $15 and a quantity of 80. Now suppose producers decide to cut output to 40in order to raise the price to $18.

Refer to Figure 4-3. At the equilibrium price of $15 consumers are willing to buy 80 pounds of tiger shrimp. Is this an economically efficient quantity?

No, the marginal benefit of the 80th unit exceeds the marginal cost of the 80th unit.

Yes, because marginal cost is zero at the 80th unit.

No, the marginal cost of the 80th unit exceeds the marginal benefit of the 80th unit.

Yes, because $15 is the price where the marginal benefit is equal to the marginal cost.

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Demand	Supply
P = 50 - 2Q^D	P = 35 + Q^S
Q^D = 25 - 0.5P	Q^S = P - 35

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