When a market is in equilibrium and the marginal consumer values a commodity at less than the social cost of producing it,then
A)at market equilibrium the demand curve lies below the social cost curve.
B)reducing production to a level below the equilibrium level could possibly raise total economic well-being.
C)the equilibrium price is higher than necessary to insure maximum economic well-being.
D)Both a and b are correct.

Question

Quizplus · Accepted Answer

If the marginal consumer values a commodity at less than the social cost of producing it, the demand curve is below the social cost curve at market equilibrium, as stated in option (A). This means that the quantity supplied is higher and the price is lower than the socially optimal levels. Hence, reducing production to a level below the equilibrium level could possibly raise total economic well-being, as stated in option (B). Therefore, both options (A) and (B) are correct.

When a Market Is in Equilibrium and the Marginal Consumer