Figure: Market Failure (Figure: Market Failure) In the figure Market Failure, if production in this competitive market is at quantity F, then:
A)marginal benefit is equal to marginal cost.
B)marginal benefit is less than marginal cost.
C)marginal benefit is greater than marginal cost.
D)price is equal to marginal cost and greater than marginal benefit.

Question

Figure: Market Failure   (Figure: Market Failure) In the figure Market Failure, if production in this competitive market is at quantity F, then:
A)marginal benefit is equal to marginal cost. 
B)marginal benefit is less than marginal cost. 
C)marginal benefit is greater than marginal cost. 
D)price is equal to marginal cost and greater than marginal benefit.

Quizplus · Accepted Answer

At quantity F, the marginal benefit curve intersects with the marginal cost curve. This means that the additional benefit received from producing one more unit is equal to the additional cost of producing that unit. Therefore, the market is producing the efficient quantity, which is where marginal benefit equals marginal cost.

Figure: Market Failure (Figure: Market Failure) in the Figure