Figure 7-23
-Refer to Figure 7-23.The efficient price-quantity combination is
A)P1 and Q1.
B)P2 and Q2.
C)P3 and Q1.
D)P4 and 0.

Question

Figure 7-23 
-Refer to Figure 7-23.The efficient price-quantity combination is
A)P1 and Q1. 
B)P2 and Q2. 
C)P3 and Q1. 
D)P4 and 0.

Quizplus · Accepted Answer

The efficient price-quantity combination is where the marginal social benefit (MSB) equals the marginal social cost (MSC), which occurs at point E on the graph. At this point, the price is P2 and the quantity is Q2, as shown on the graph. Therefore, choice B, P2 and Q2, is the best choice.

Figure 7-23 -Refer to Figure 7-23.The Efficient Price-Quantity Combination Is