When resources are misallocated, or allocated inefficiently

[ETearle]

Question 1

Assume that price underestimates the value that society places on the flu vaccine. If firms produce where 
P = 
MC, firms will be producing

◦ the socially efficient amount of flu vaccine.
◦ more than the socially efficient amount of flu vaccine
◦ less than the socially efficient amount of flu vaccine.
◦ so that consumer surplus is zero.

Question 2

When resources are misallocated, or allocated inefficiently

◦ market failure occurs.
◦ then there must be external costs or benefits in production.
◦ then it must be the case that there is imperfect information in the market.
◦ then it must be the case that the good is a public good.

[dmurph1496]

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[ETearle]

Thanks for the timely response, appreciate it

[ryhom]

TYSM