-The above figure shows the marginal social benefit and marginal social cost curves of doughnuts in the nation of Kaffenia. Which of the following would lead the quantity of doughnuts in Kaffenia to differ from the efficient quantity?
A) The existence of many producers and sellers of doughnuts.
B) The existence of just one producer and seller of doughnuts.
C) Damage to the environment from the disposal of oil used to cook the doughnuts.
D) Both answers B and C are correct.

Question

-The above figure shows the marginal social benefit and marginal social cost curves of doughnuts in the nation of Kaffenia. Which of the following would lead the quantity of doughnuts in Kaffenia to differ from the efficient quantity?
A) The existence of many producers and sellers of doughnuts. 
B) The existence of just one producer and seller of doughnuts. 
C) Damage to the environment from the disposal of oil used to cook the doughnuts. 
D) Both answers B and C are correct.

Quizplus · Accepted Answer

The existence of just one producer (monopoly) can lead to inefficiency due to lack of competition, and environmental damage represents a negative externality, both causing the quantity to differ from the efficient level.

-The Above Figure Shows the Marginal Social Benefit and Marginal