The following figure shows the private cost and social cost of producing Good X.

-Refer to the figure above.Social surplus will be maximized when the quantity supplied of Good X is ________.
A) Q₁ units
B) Q₂ units
C) greater than Q₁ units
D) greater than Q₂ units

Question

The following figure shows the private cost and social cost of producing Good X.
 
-Refer to the figure above.Social surplus will be maximized when the quantity supplied of Good X is ________.
A) Q₁ units 
B) Q₂ units 
C) greater than Q₁ units 
D) greater than Q₂ units

Quizplus · Accepted Answer

Social surplus is maximized where marginal social benefit (MSB) equals marginal social cost (MSC), which occurs at Q₂ units. At any quantity above Q₂, the MSC exceeds the MSB, resulting in a decrease in social surplus. Therefore, the best choice is Q₂ units.

The Following Figure Shows the Private Cost and Social Cost