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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