The following diagram contains information on cost and revenue curves facing a regulated monopoly.
FIGURE 9-3

-Refer to Figure 9-3. Where would the socially efficient level of output occur?
A) where price equals average total cost at Q3
B) where marginal revenue equals marginal cost at Q2
C) where price equals marginal cost at Q4
D) where price equals marginal revenue at Q1

Question

The following diagram contains information on cost and revenue curves facing a regulated monopoly.
FIGURE 9-3
 
-Refer to Figure 9-3. Where would the socially efficient level of output occur?
A) where price equals average total cost at Q3 
B) where marginal revenue equals marginal cost at Q2 
C) where price equals marginal cost at Q4 
D) where price equals marginal revenue at Q1

Quizplus · Accepted Answer

The socially efficient level of output occurs where price equals marginal cost, which in this case is at Q4. This is the point where the marginal cost curve intersects with the demand curve, meaning that the output level produces maximum social surplus. At this point, the price charged to consumers is equal to the marginal cost of production, ensuring that resources are allocated efficiently. Therefore, choice C is the correct answer.

The Following Diagram Contains Information on Cost and Revenue Curves