When output is less than the efficient level,
A) consumers are willing to pay more for another unit than it costs to produce the unit.
B) the amount consumers are willing to pay equals the cost of production.
C) the cost of production is greater than the price consumers are willing to pay.
D) the production costs can't be measured.
E) the marginal cost of producing the good must be greater than the marginal benefit from the good.

Question

Quizplus · Accepted Answer

When output is less than the efficient level, it implies that the value (or price) consumers place on an additional unit of the good is higher than what it costs to produce that unit. This is a situation where increasing production would be beneficial because the marginal benefit (what consumers are willing to pay) exceeds the marginal cost (the cost to produce another unit).

When Output Is Less Than the Efficient Level