In the figure given below,D 1 and S 1 are the private demand and supply curves,of a commodity produced by a competitive firm.S 2 reflects the social marginal cost of production,while S 0 represents the external marginal cost.
-From Figure 20-1,we can infer that the efficient output is:
A)900 units.
B)500 units.
C)400 units.
D)600 units.

Question

In the figure given below,D 1 and S 1 are the private demand and supply curves,of a commodity produced by a competitive firm.S 2 reflects the social marginal cost of production,while S 0 represents the external marginal cost. 
-From Figure 20-1,we can infer that the efficient output is:
A)900 units. 
B)500 units. 
C)400 units. 
D)600 units.

Quizplus · Accepted Answer

The efficient output is where the social marginal cost (SMC) intersects with the private demand (PD) curve. In this case, we can see that this intersection happens at point U1, where the quantity demanded is 400 units. This is because at this point, the SMC is equal to the marginal private benefit (MPB), which is given by PD. Any higher quantity (such as 500 or 600 units) would result in a higher SMC than MPB, leading to deadweight loss. Therefore, the best choice is C) 400 units.

In the Figure Given Below,D1 and S1 Are the Private

In the Figure Given Below,D₁ and S₁ Are the Private