If the price of a product is less than its marginal social costs,then:
A)Society would prefer more of this product being produced.
B)Society would prefer less of this product being produced.
C)External costs must be zero.
D)Short-run average costs must be at minimum.

Question

Quizplus · Accepted Answer

If the price of a product is less than its marginal social costs, it means that the actual cost of producing that product is more than the cost that the producer is paying. This implies that the producer is not bearing the full cost of production, and some of the costs are being borne by the society in the form of externalities. In this case, society would prefer less of this product being produced as the cost to the society is more than the benefit derived from the product. Therefore, the correct choice is B.

If the Price of a Product Is Less Than Its