If the marginal benefit received from a good is equal to the marginal cost of production, then:
A) society's well-being can be improved if production increases.
B) society's well-being can be improved if production decreases.
C) the market is producing too much of the good.
D) the market is producing an efficient quantity.

Question

Quizplus · Accepted Answer

When the marginal benefit received from a good is equal to the marginal cost of production, it means that the market is producing an efficient quantity. This is because the marginal benefit represents the value that consumers place on an additional unit of the good, while the marginal cost represents the cost of producing an additional unit. Therefore, if the marginal benefit is equal to the marginal cost, it implies that consumers are willing to pay exactly the cost of production for that unit, and no more. Hence, producing more would not increase society's well-being, as the cost would exceed the value placed on the additional unit, and producing less would mean that consumers are losing out on the value of the good. Therefore, the market is producing an efficient quantity at which societal welfare is maximized.

If the Marginal Benefit Received from a Good Is Equal