A quantity less than the equilibrium quantity in a competitive market is inefficient because
A) the marginal benefit of another unit is greater than its marginal cost.
B) too much of the good is being produced.
C) the marginal cost of another unit is greater than its marginal benefit.
D) the marginal benefit of another unit is not equal to zero.
E) the marginal benefit is not maximized.

Question

Quizplus · Accepted Answer

In a competitive market, if the quantity is less than the equilibrium quantity, it means that there are more benefits to be gained from producing additional units, as the marginal benefit (the benefit from consuming one more unit) is greater than the marginal cost (the cost of producing one more unit). This situation indicates inefficiency because producing and consuming additional units would increase overall welfare until the marginal cost equals the marginal benefit, which occurs at the equilibrium quantity.

A Quantity Less Than the Equilibrium Quantity in a Competitive