Exhibit 17-2 In Exhibit 17-2, the socially efficient price and level of output are
A)$6 and 50 units, respectively
B)$12 and 50 units, respectively
C)$12 and 40 units, respectively
D)$6 and 40 units, respectively
E)not indicated

Question

Exhibit 17-2  In Exhibit 17-2, the socially efficient price and level of output are
A)$6 and 50 units, respectively 
B)$12 and 50 units, respectively 
C)$12 and 40 units, respectively 
D)$6 and 40 units, respectively 
E)not indicated

Quizplus · Accepted Answer

The socially efficient price and level of output occur where the marginal cost (MC) curve intersects the marginal social benefit (MSB) curve. In Exhibit 17-2, this occurs at a price of $12 and a level of output of 40 units, as shown by the point where MC and MSB intersect. Therefore, the answer is C.

Exhibit 17-2 in Exhibit 17-2, the Socially Efficient Price