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Suppose that purely competitive firms producing cashews discover that P exceeds MC.

 

a. Is their combined output of cashews too little, too much, or just right to achieve allocative efficiency?

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(a)too little

(b)too much

(c)just right

 

b. In the long run, what will happen to the supply of cashews and the price of cashews?

 

(a)Supply will increase and the price of cashews will increase.

(b)Supply will increase and the price of cashews will decrease.

(c)Supply will decrease and the price of cashews will decrease

(d)Supply will decrease and the price of cashews will increase.

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