What is meant by the term socially optimum price?
A)The price which ensures that the firm is able to make normal profits only.
B)The price which ensures that the firm is able to make economic profits only.
C)The price which ensures that the output will be produced at the lowest possible cost.
D)The price which ensures the best allocation of products.
E)A price equal to average cost.

Question

Quizplus · Accepted Answer

Socially optimum price is the price which ensures the best allocation of products, i.e., the price at which the marginal social benefit equals the marginal social cost. This ensures allocative efficiency, as resources are allocated where they are most valued in society.

What Is Meant by the Term Socially Optimum Price