Use the figure below to answer the following question. Figure 6.4.1
-Refer to Figure 6.4.1.The graph shows the market for tomatoes.When the government introduces a subsidy for tomatoes at $4 a kilogram,the quantity produced is ________ because ________.
A)efficient;marginal social cost is less than marginal social benefit
B)efficient;marginal social benefit equals marginal social cost
C)inefficient;marginal social cost is less than marginal social benefit
D)inefficient;marginal social benefit is less than marginal social cost
E)inefficient;marginal social cost is zero

Question

Use the figure below to answer the following question.  Figure 6.4.1
-Refer to Figure 6.4.1.The graph shows the market for tomatoes.When the government introduces a subsidy for tomatoes at $4 a kilogram,the quantity produced is ________ because ________.
A)efficient;marginal social cost is less than marginal social benefit 
B)efficient;marginal social benefit equals marginal social cost 
C)inefficient;marginal social cost is less than marginal social benefit 
D)inefficient;marginal social benefit is less than marginal social cost 
E)inefficient;marginal social cost is zero

Quizplus · Accepted Answer

When a subsidy is introduced, it typically lowers the cost for producers, encouraging them to produce more. However, if the subsidy leads to a situation where the marginal social benefit (the value to consumers) is less than the marginal social cost (the cost to produce, including any externalities), it results in overproduction and inefficiency. This is because resources are being used to produce goods beyond the point where their production value matches their cost to society.

Use the Figure Below to Answer the Following Question