Refer to Scenario 16.1 below to answer the question(s) that follow.
SCENARIO 16.1: The marginal benefit for a particular food is described by MB = 30 - q, where q refers to the quantity of the food. The marginal cost of producing the food is described by MC = 2q. There is a negative externality associated with food production and the marginal social cost of food production is MSC = 4q.
-Refer to Scenario 16.1. The efficient output level is ________ and the efficient price is ________.
A) 10 units of food; $20
B) 6 units of food; $24
C) 0 units of food; $0
D) 4.29 units of food; $25.71

Question

Quizplus · Accepted Answer

To find the efficient output level, set the marginal benefit (MB) equal to the marginal social cost (MSC): 30 - q = 4q. Solving for q gives q = 6. To find the efficient price, substitute q = 6 into the MC or MSC equation (since they should be equal at the efficient point), giving MC = 2(6) = 12 or MSC = 4(6) = 24. The correct efficient price is based on the MSC, so it's $24.