Use the figure below to answer the following questions.

Figure 16.3.1
-Refer to Figure 16.3.1. The figure shows the marginal private benefit curve, the marginal social benefit curve, and the market supply curve. If production is left to the private market, then
A)the quantity produced is less than the efficient quantity.
B)the quantity produced is greater than the efficient quantity.
C)price is greater than marginal social benefit quantity.
D)the marginal cost curve is horizontal.
E)the quantity produced is zero.

Question

Use the figure below to answer the following questions.
  
Figure 16.3.1
-Refer to Figure 16.3.1. The figure shows the marginal private benefit curve, the marginal social benefit curve, and the market supply curve. If production is left to the private market, then
A)the quantity produced is less than the efficient quantity. 
B)the quantity produced is greater than the efficient quantity. 
C)price is greater than marginal social benefit quantity. 
D)the marginal cost curve is horizontal. 
E)the quantity produced is zero.

Quizplus · Accepted Answer

The marginal private benefit curve represents the benefit received by the individual consumer, while the marginal social benefit curve represents the benefit to society as a whole. Since the marginal private benefit curve is below the marginal social benefit curve, there is an external benefit that is not being accounted for by the individual consumer. Therefore, the quantity produced in the private market is less than the efficient quantity, which is where the marginal social benefit equals the marginal cost.

Use the Figure Below to Answer the Following Questions