Use the following figure to answer the question : Figure 20-2 : shows the competitive supply curve of a commodity is given by S 1 ,the private marginal benefit curve is D 1 ,the marginal social benefit curve is D 2 ,and the MB E curve reflects the marginal external benefits.
-In Figure 20-2,if the current level of output is 700 units,then the marginal social benefit is:
A)more than the marginal social cost and the output is more than the socially optimum level.
B)more than the marginal social cost and the output is less than the socially optimum level.
C)less than the marginal social cost and the output is more than the socially optimum level.
D)equal to the marginal social cost and the output is equal to the socially optimum level.

Question

Use the following figure to answer the question : Figure 20-2 : shows the competitive supply curve of a commodity is given by S 1 ,the private marginal benefit curve is D 1 ,the marginal social benefit curve is D 2 ,and the MB E curve reflects the marginal external benefits. 
-In Figure 20-2,if the current level of output is 700 units,then the marginal social benefit is:
A)more than the marginal social cost and the output is more than the socially optimum level. 
B)more than the marginal social cost and the output is less than the socially optimum level. 
C)less than the marginal social cost and the output is more than the socially optimum level. 
D)equal to the marginal social cost and the output is equal to the socially optimum level.

Quizplus · Accepted Answer

If the marginal social benefit is less than the marginal social cost at a current output level, it indicates that the production is beyond the socially optimal level, as the cost of producing one more unit exceeds the benefit derived from it.

Use the Following Figure to Answer the Question : Figure