When a nation is under-allocating resources to the production of a good, then the
A) marginal benefit is greater than the marginal cost of the good.
B) marginal benefit is less than the marginal cost of the good.
C) marginal cost of producing the good is decreasing.
D) marginal benefit of producing the good is increasing.

Question

Quizplus · Accepted Answer

When a nation is under-allocating resources to the production of a good, it means that the marginal benefit of producing the good is higher than the marginal cost. In other words, the society is not producing as much of the good as it should be, given the benefits it provides. As production increases, the marginal cost will eventually rise to equal the marginal benefit, but at the current level of production, the marginal benefit is greater than the marginal cost.

When a Nation Is Under-Allocating Resources to the Production of a Good