When an athletic shoe company is producing a level of output at which price is greater than MC, from society's standpoint the company is producing too
A) Much because society is giving up more to produce additional shoes than the shoes are worth.
B) Much because society would be willing to give up more alternative goods in order to get additional shoes.
C) Little because society is giving up more to produce additional shoes than the shoes are worth.
D) Little because society would be willing to give up more alternative goods in order to get additional shoes. High profits in a particular industry indicate that consumers want a different mix of output (more of that particular industry's goods).

Question

Quizplus · Accepted Answer

When price is greater than marginal cost (MC), it indicates that consumers value the product more than it costs to produce additional units. Therefore, from society's standpoint, the company is producing too little because society would be willing to give up more alternative goods in order to get additional shoes. This scenario suggests that increasing production would be beneficial to meet consumer demand and societal welfare.

When an Athletic Shoe Company Is Producing a Level of Output