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Explain why businesses and entrepreneurs are more likely to voluntarily undertake the projects that consumers value...

Explain why businesses and entrepreneurs are more likely to voluntarily undertake the projects that consumers value highly relative to price and less likely to undertake the government-sponsored projects in which the per-unit cost of production is above the price consumers willingly pay.

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Answer #1

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Whenever the product is valued more than its price, it is more likely that it's demand is more and consumers are willing to buy that product. As long as consumer's willingness to pay is higher than the price charged by the producers, they will be having some consumer surplus. Positive consumer surplus would attract the consumers to buy the products.

Due to more demand of a product, all the products will be sold and the producers will not be left with inventory stock. They will also a acquire some profits if the prices are set higher than the average cost of the product.

The second case is not at all feasible for a business/producer.As the cost per unit of a product, that is average cost is higher than the price, the producers are going to acquire losses. Though the government sponsores those projects but due to probable losses in such projects, producers / business are unwilling to undertake such projects.

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