Underproduction compared to the efficient amount implies that for the last unit produced
A) marginal social benefit exceeds marginal social cost.
B) marginal social benefit equals marginal social cost.
C) marginal social cost exceeds marginal social benefit.
D) the deadweight loss is zero.

Question

Quizplus · Accepted Answer

Underproduction means not enough of a good is being produced to meet the efficient level, where marginal social benefit (MSB) equals marginal social cost (MSC). If MSB exceeds MSC, it indicates that more of the good should be produced to reach efficiency.

Underproduction Compared to the Efficient Amount Implies That for the Last