Figure 15-14

-Refer to Figure 15-14.To maximize total surplus,a benevolent social planner would choose which of the following outcomes?
A) Q = 30 and P = 30
B) Q = 30 and P = 60
C) Q = 45 and P = 45
D) Q = 60 and P = 30

Question

Figure 15-14
 
-Refer to Figure 15-14.To maximize total surplus,a benevolent social planner would choose which of the following outcomes?
A) Q = 30 and P = 30 
B) Q = 30 and P = 60 
C) Q = 45 and P = 45 
D) Q = 60 and P = 30

Quizplus · Accepted Answer

At Q = 45 and P = 45, the marginal cost (MC) equals the marginal benefit (MB), which is the socially optimal level of output. This level of output generates the largest possible surplus since it maximizes both consumer and producer surplus. If the planner chooses a higher quantity (Q = 60 and P = 30), then consumer surplus would be larger but producer surplus would be smaller since the price is lower. On the other hand, if the planner chooses a lower quantity (Q = 30 and P = 60), then producer surplus would be larger but consumer surplus would be smaller since the price is higher. Therefore, the socially optimal outcome is Q = 45 and P = 45.

Figure 15-14 -Refer to Figure 15-14.To Maximize Total Surplus,a Benevolent Social Planner