Figure: Social Benefit Refer to the figure. Which price and quantity combination represents the efficient equilibrium? A) P₁ and Q₁ B) P₂ and Q₁ C) P₃ and Q₁ D) P₂ and Q₂

Question

Quizplus · Accepted Answer

The efficient equilibrium is where the supply curve intersects the demand curve at P₂ and Q₂, which maximizes social benefit. Any other combination, such as those in choices A, B, and C, result in either underproduction or overproduction of the good, leading to a lower overall benefit to society.

Figure: Social Benefit Refer to the Figure