In the figure given below,D 1 and S 1 are the private demand and supply curves,of a commodity produced by a competitive firm.S 2 reflects the social marginal cost of production,while S 0 represents the external marginal cost.
-According to Figure 20-1,the efficient output is ______ than the equilibrium output by _____ units.
A)more;400
B)less;400
C)more;100
D)less;200

Question

In the figure given below,D 1 and S 1 are the private demand and supply curves,of a commodity produced by a competitive firm.S 2 reflects the social marginal cost of production,while S 0 represents the external marginal cost. 
-According to Figure 20-1,the efficient output is ______ than the equilibrium output by _____ units.
A)more;400 
B)less;400 
C)more;100 
D)less;200

Quizplus · Accepted Answer

The efficient output is where the social marginal cost (SMC) intersects with the private demand (D) curve, which is at point U1. At this output level, the price is P1 and the quantity is Q1. However, the equilibrium occurs where the private marginal cost (PMC) intersects with the private demand curve, which is at point B1. At this output level, the price is P0 and the quantity is Q0. 
Therefore, the efficient output is less than the equilibrium output by 200 units (Q1 - Q0). So, the correct answer is D (less; 200).

In the Figure Given Below,D1 and S1 Are the Private

In the Figure Given Below,D₁ and S₁ Are the Private