If there are no externalities, producing where price is greater than marginal cost is inefficient because for every unit produced, consumers derive benefits that are less than the cost of the resources needed to produce it.

Question

Quizplus · Accepted Answer

Producing where price is greater than marginal cost is actually efficient up to the point where price equals marginal cost, because it indicates that consumers value the product more than the resources needed to produce it, leading to an efficient allocation of resources.

If There Are No Externalities, Producing Where Price Is Greater