At the current level of output, the marginal social cost of tennis balls is greater than the marginal social benefit. Then
A) too few tennis balls are being produced.
B) there is excess demand for tennis balls.
C) more than the efficient quantity of tennis balls is being produced.
D) firms producing tennis balls must be earning negative profit.

Question

Quizplus · Accepted Answer

When the marginal social cost of producing a good (in this case, tennis balls) exceeds the marginal social benefit, it indicates that more of the good is being produced than is socially optimal. This is because the cost to society of producing one more unit (in terms of resources used and potential negative externalities) is greater than the benefit that one more unit brings to society.

At the Current Level of Output, the Marginal Social Cost