Suppose a market produces 5,000 tons of wheat.At this quantity,the marginal cost exceeds the marginal benefit.This outcome could be the result of
A) a quantity regulation limiting the amount that can be produced.
B) a monopoly.
C) a subsidy.
D) an external benefit.
E) producing a public good.

Question

Quizplus · Accepted Answer

When the marginal cost exceeds the marginal benefit, it suggests that too much of a good is being produced relative to the efficient level. A subsidy, by lowering the cost of production or increasing the revenue for producers, can lead to overproduction as it encourages the production of quantities beyond the point where marginal cost equals marginal benefit.

Suppose a Market Produces 5,000 Tons of Wheat