Figure 7-3

-Government provides many goods and services to the public because they are not provided by free markets.Some economists believe bureaucrats who manage the programs have no interest in maximizing net benefits (profits) but instead maximize the size of a program constrained only by the need to have total benefits exceed total costs.Figure 7-3 shows total benefits and cost curves for a program.What point is the efficient point, and what point will the bureaucrat choose?
A)A and B, respectively
B)B and D, respectively
C)D and C, respectively
D)D and A, respectively

Question

Figure 7-3
​ 
-Government provides many goods and services to the public because they are not provided by free markets.Some economists believe bureaucrats who manage the programs have no interest in maximizing net benefits (profits) but instead maximize the size of a program constrained only by the need to have total benefits exceed total costs.Figure 7-3 shows total benefits and cost curves for a program.What point is the efficient point, and what point will the bureaucrat choose?
A)A and B, respectively 
B)B and D, respectively 
C)D and C, respectively 
D)D and A, respectively

Quizplus · Accepted Answer

The efficient point is where the marginal cost equals the marginal benefit, which is point B on the graph. However, the bureaucrat will choose point D because it maximizes the size of the program while still ensuring that total benefits exceed total costs. This is known as the bureaucratic equilibrium.

Figure 7-3 ​

Figure 7-3