Exhibit 7-1 -Refer to Exhibit 7-1. If Firm a Is Producing 5

Multiple Choice

Exhibit 7-1
-Refer to Exhibit 7-1. If Firm A is producing 5 units and Firm B is producing 3 units, then

A) both firms should produce more because there is no way only 8 units could fulfill demand in a market.
B) Firm A should produce more and Firm B should produce less.
C) if Firm B reduced production by 1 unit, the savings would allow Firm A to produce 6 more units.
D) if Firm A reduced production by 1 unit, the savings would allow Firm B to produce 2 more units.
E) Pareto efficiency is achieved.