If a benevolent social planner chooses to producer less than the equilibrium quantity of a good, then ?
Correct answer: B. the value placed on the last unit production by buyers exceeds the cost of production.
- A. total surplus is maximized
- B. the value placed on the last unit production by buyers exceeds the cost of production.
- C. producer surplus is maximized
- D. the cost of production on the last unit produced exceeds the value placed on it by buyers.
- E. consumer surplus is maximized
Explanation
At the equilibrium quantity, the value of the marginal unit equals its marginal cost. If production is stopped below that quantity, buyers value the last unit produced more than it costs to make, so output should be increased.
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Individual consumers, firms and markets are examined through demand and supply, elasticity, consumer choice, production, costs, revenue and the determination of prices and output. The topic also covers market structures such as perfect competition, monopoly and oligopoly, plus market failure, externalities and the distinction between microeconomic decisions and economy-wide outcomes.
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