When there is overproduction of a good:
A) The marginal benefit of the good exceeds its marginal cost
B) The marginal cost of the good exceeds its marginal benefit
C) The net benefit of producing extra units if the good is positive
D) The allocative efficiency is enhanced

Question

Quizplus · Accepted Answer

When there is overproduction of a good, it means that the marginal cost of producing an additional unit exceeds the marginal benefit of producing it. This results in a situation where resources are being inefficiently allocated which lowers economic welfare. Additionally, as more units are produced, the price will decrease due to the surplus of supply which further decreases economic welfare.

When There Is Overproduction of a Good