Question

Which of the following choices is correct? Multiple Choice When marginal benefit is equal to marginal...

Which of the following choices is correct? Multiple Choice

When marginal benefit is equal to marginal cost a sub-optimal amount of the good is produced.

When marginal benefit is equal to marginal cost the least amount of the good is produced.

When marginal benefit is equal to marginal cost the greatest amount of the good is produced.

When marginal benefit is equal to marginal cost the smallest quantity of the good is produced.

When MB=MC meaning where they both intersect each other,then a sub optimal amount of the good is produced at this level.If you go left of this,you give up potential gains as MB>MC and if you go right of this point then your costs are higher than the benefits.

Option(A)

When marginal benefit is equal to marginal cost the greatest amount of the good is produced.

When marginal revenue is equal to marginal cost a sub-optimal amount of the goods is produced.

Explanation :

When

Marginal revenue = Marginal cost

Profit is maximised.

Profit maximisation is not the social benefit maximisation and hence, it is sub-opti

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