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In Sicily, many households can grow lemons of the same quality as each other - Edexcel - A-Level Economics A - Question 5 - 2021 - Paper 1
Question 5
In Sicily, many households can grow lemons of the same quality as each other. Chiara decides to sell lemons at her local market, expecting to make a normal profit. S... show full transcript
Worked Solution & Example Answer:In Sicily, many households can grow lemons of the same quality as each other - Edexcel - A-Level Economics A - Question 5 - 2021 - Paper 1
Step 1
Which one of the following will exist in the short run if Chiara makes a loss?
Answer
The correct answer is B: Allocative efficiency and productive inefficiency.
- Analysis:
- A is incorrect because the firm is not operating at its minimum point on the AC curve if it's making a loss.
- C is incorrect since P = MC, indicating that the firm is allocatively efficient.
- D is incorrect as the reasons seen in A and C clarify that it can't maintain both conditions in this scenario.