Assuming there are no externalities, if a firm is producing at an output level where the benefits to consumers are less than the cost to the suppliers to produce it, then price
A) equals marginal cost.
B) is greater than marginal cost.
C) is less than marginal cost.
D) is less than marginal revenue.

Question

Quizplus · Accepted Answer

When the benefits to consumers (reflected by the price they are willing to pay) are less than the cost to suppliers to produce it (reflected by the marginal cost), it indicates that the price is less than the marginal cost. This situation suggests inefficiency, as the resources could be better utilized elsewhere.

Assuming There Are No Externalities, If a Firm Is Producing