FIGURE 16- 1
-Refer to Figure 16- 1. Suppose that the perfectly competitive market with no government intervention achieves equilibrium at point A. If the social marginal costs and social marginal benefits are represented by MC1 and MB0, respectively, then the competitive equilibrium quantity is

Question

Quizplus · Accepted Answer

At the competitive equilibrium quantity represented by point A, the marginal social benefit (MB0) is less than the marginal social cost (MC1). This means that the production of the good at this quantity is generating more costs for society than the benefits it provides. Therefore, the equilibrium quantity is too high for allocative efficiency.

FIGURE 16- 1 -Refer to Figure 16- 1. Suppose That the Perfectly Competitive