A good is said to be overproduced in an economy if:
A)the marginal cost of producing the good is less than its price.
B)the marginal benefit derived from the consumption of the good is more than the price.
C)the social marginal cost exceeds the social marginal benefit.
D)the production of the good generates a positive externality.

Question

Quizplus · Accepted Answer

The correct answer is C because when the social marginal cost of producing a good exceeds the social marginal benefit, it indicates that the resources are not being used efficiently, leading to overproduction. This situation implies that the cost to society of producing one more unit of the good is higher than the benefit society receives from that additional unit, suggesting overproduction.

A Good Is Said to Be Overproduced in an Economy