-The figure above shows the market for a good with an external benefit. The efficient level of production is ________ units because ________.
A) 8; marginal benefit equals the marginal external benefit
B) 8; marginal benefit equals marginal cost
C) 8; marginal cost is less than marginal social benefit
D) 10; marginal cost equals marginal social benefit
E) 10; marginal social benefit exceeds marginal benefit

Question

-The figure above shows the market for a good with an external benefit. The efficient level of production is ________ units because ________.
A) 8; marginal benefit equals the marginal external benefit 
B) 8; marginal benefit equals marginal cost 
C) 8; marginal cost is less than marginal social benefit 
D) 10; marginal cost equals marginal social benefit 
E) 10; marginal social benefit exceeds marginal benefit

Quizplus · Accepted Answer

The efficient level of production in a market with an external benefit occurs where the marginal cost (MC) equals the marginal social benefit (MSB), which includes both the private benefit and the external benefit. This ensures that all benefits, including those to third parties, are considered in the production decision.

-The Figure Above Shows the Market for a Good with an External