The diagram below shows the private and social marginal costs (MCP and MCS)and the social marginal benefits (MBS)of producing disposable diapers.
FIGURE 17-2
-Refer to Figure 17-2.The allocatively efficient level of production and use of disposable diapers is

Question

The diagram below shows the private and social marginal costs (MCP and MCS)and the social marginal benefits (MBS)of producing disposable diapers.
  FIGURE 17-2
-Refer to Figure 17-2.The allocatively efficient level of production and use of disposable diapers is

Quizplus · Accepted Answer

The allocatively efficient level of production and use of disposable diapers is where the social marginal benefit (MBS) equals the social marginal cost (MCS), which is at Q0. At this level, the overall social welfare is maximized as the benefits to society from producing disposable diapers (MBS) are equal to the costs incurred by society (MCS). Therefore, choice B is the correct answer.

The Diagram Below Shows the Private and Social Marginal Costs