Figure 4-6 Figure 4-6 Shows the Market for Granola

Multiple Choice

Figure 4-6 Figure 4-6 shows the market for granola. The market is initially in equilibrium at a price of P₁ and a quantity of Q₁. Now suppose producers decide to cut output to Q₂ in order to raise the price to P_2.
-Refer to Figure 4-6. At the equilibrium price of P₁, consumers are willing to buy Q₁ pounds of granola. Is this an economically efficient quantity?

A) No, the marginal benefit of the last unit (Q₁) exceeds the marginal cost of that last unit.
B) Yes, because marginal cost is zero at the price of P₁.
C) Yes, because P₁ is the price where marginal benefit equals marginal cost.
D) No, the marginal cost of the last unit (Q₁) exceeds the marginal benefit of the last unit.