-The figure above shows the market for milk. If the government pays the milk producers a subsidy and production increases to 300 gallons per day
A) the market is efficient because the marginal social benefit from the last gallon of milk exceeds its marginal social cost.
B) the market is efficient because the total social benefit from milk exceed the total social cost.
C) there is a deadweight loss because the marginal social benefit from the last gallon of milk exceeds its marginal social cost.
D) there is a deadweight loss because the marginal social cost of the last gallon of milk exceeds its marginal social benefit.

Question

-The figure above shows the market for milk. If the government pays the milk producers a subsidy and production increases to 300 gallons per day
A) the market is efficient because the marginal social benefit from the last gallon of milk exceeds its marginal social cost. 
B) the market is efficient because the total social benefit from milk exceed the total social cost. 
C) there is a deadweight loss because the marginal social benefit from the last gallon of milk exceeds its marginal social cost. 
D) there is a deadweight loss because the marginal social cost of the last gallon of milk exceeds its marginal social benefit.

Quizplus · Accepted Answer

A subsidy that increases production beyond the equilibrium quantity results in a deadweight loss because the marginal social cost of the last gallon of milk exceeds its marginal social benefit.

-The Figure Above Shows the Market for Milk