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Assume that candle wax is traded in a perfectly competitive market in which the demand curve captures buyers’ full willingness to pay while the supply curve reflects all production costs. For each of the following situations, indicate whether the total output should be increased, decreased, or kept the same in order to achieve allocative and productive efficiency.
a. The maximum willingness to pay exceeds minimum acceptable price.
b. Marginal Cost > Marginal Benefit.
c. Total surplus is at a maximum.
d. The current quantity produced exceeds the market equilibrium quantity.
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