Assume that society places a higher value on the last unit of X produced than the value of the resources used to produce that unit. With no spillovers, this information means that
A) total cost is greater than total revenue.
B) price is greater than marginal cost.
C) marginal cost is greater than price.
D) resources are being overallocated to X.

Question

Quizplus · Accepted Answer

If society values the last unit of X produced more than the resources used to produce it, then the price that consumers are willing to pay will be higher than the marginal cost of production. This is because the society is willing to pay more for the good than it costs to produce, indicating that there is a demand for the good. Thus, choice B, where price is greater than marginal cost, is the best option.

Assume That Society Places a Higher Value on the Last