Figure 10-7
-Refer to Figure 10-7. Which quantity represents the social optimum for this market?

Question

Figure 10-7 -Refer to Figure 10-7. Which quantity represents the social optimum for this market? A)Q_1. B)Q₂. C)Q_3. D)Q_4.

Quizplus · Accepted Answer

The social optimum occurs where the marginal social benefit (MSB) equals the marginal social cost (MSC), which is represented by the intersection of the demand curve (D) and the marginal cost (MC) curve. In this case, it is at point S1U1B13, where the quantity demanded is QS1U1B13 and the price is S1U1B0. This level of output maximizes total surplus (consumer surplus plus producer surplus) in the market.

Figure 10-7 -Refer to Figure 10-7. Which Quantity Represents the Social Optimum