Exhibit 17-2
-In Exhibit 17-2,the socially efficient price and level of output are
A)$6 and 50 units,respectively
B)$12 and 50 units,respectively
C)$12 and 40 units,respectively
D)$6 and 40 units,respectively
E)not indicated

Question

Exhibit 17-2 
-In Exhibit 17-2,the socially efficient price and level of output are
A)$6 and 50 units,respectively 
B)$12 and 50 units,respectively 
C)$12 and 40 units,respectively 
D)$6 and 40 units,respectively 
E)not indicated

Quizplus · Accepted Answer

The socially efficient level of output is where marginal social cost (MSC) equals marginal social benefit (MSB), which is at 40 units. At this level of output, the socially efficient price is equal to the MSB at that point, which is $12. Therefore, the socially efficient price and level of output are $12 and 40 units, respectively. Option C is the only choice that reflects this combination.

Exhibit 17-2 -In Exhibit 17-2,the Socially Efficient Price and Level of Output