The efficient level of output occurs when:

Question

Quizplus · Accepted Answer

The efficient level of output occurs when marginal social benefit (MSB) equals marginal social cost (MSC). This is because when MSB is greater than MSC, there is a net benefit to society in producing an additional unit of output, and when MSC is greater than MSB, the cost to society of producing an additional unit is greater than the benefit, leading to a net loss to society. Therefore, to achieve allocative efficiency, the level of output should be such that MSB equals MSC.

The Efficient Level of Output Occurs When