Figure 10-10
-Refer to Figure 10-10. "The social cost of the last unit produced exceeds the value to buyers of the last unit produced by $3." This statement is correct at which quantity of output?
A)120 units
B)140 units
C)160 units
D)The statement is true at all quantities of output.

Question

Figure 10-10 
-Refer to Figure 10-10. "The social cost of the last unit produced exceeds the value to buyers of the last unit produced by $3." This statement is correct at which quantity of output?
A)120 units 
B)140 units 
C)160 units 
D)The statement is true at all quantities of output.

Quizplus · Accepted Answer

At 140 units, the marginal cost and marginal benefit intersect at $15. However, the social cost curve is $3 higher than the supply curve, meaning that the social cost of producing the 140th unit is $18. Therefore, the statement that "The social cost of the last unit produced exceeds the value to buyers of the last unit produced by $3" is correct at 140 units. At 120 units, the statement is not true because the marginal cost and marginal benefit intersect at $18, which is equal to the social cost. At 160 units, the statement is not true because the marginal cost ($21) is greater than the social cost ($18). As for choice D, it is incorrect because the statement is not true at all quantities of output.

Figure 10-10 -Refer to Figure 10-10. "The Social Cost of the Last