Which pricing rule generates the greatest welfare for society?
A) marginal cost
B) average cost
C) total cost
D) fixed cost
E) variable cost

Question

Quizplus · Accepted Answer

Marginal cost pricing ensures that resources are allocated efficiently, with prices reflecting the true cost of production. This leads to optimal allocation of resources and maximizes welfare for society as a whole. Average cost or total cost pricing may lead to inefficiencies and result in less welfare for society. Fixed and variable cost are not relevant pricing rules as they do not take into account the true cost of producing an additional unit.

Which Pricing Rule Generates the Greatest Welfare for Society