Which pricing rule generates the greatest welfare for society?
A) marginal cost pricing rule
B) average cost pricing rule
C) total cost pricing rule
D) fixed cost pricing rule
E) variable cost pricing rule

Question

Quizplus · Accepted Answer

The marginal cost pricing rule generates the greatest welfare for society because it sets the price equal to the incremental cost of producing one additional unit. This ensures that the price reflects the true cost of production and encourages firms to produce at the lowest cost possible, leading to maximum efficiency and consumer surplus. Additionally, it creates an incentive for innovation and technological advancement, as firms can reduce their costs and increase their profits by improving their production processes.

Which Pricing Rule Generates the Greatest Welfare for Society