Suppose a factory can be designed to produce either trucks or cars. The figure above shows the marginal cost and marginal benefit of producing trucks in terms of the forgone cars
a. What is the marginal benefit of the 25th truck?
b. What is the marginal cost of the 25th truck?
c. Should the 25th truck be produced? Why or why not.
d. What is the marginal benefit of the 75th truck?
e. What is the marginal cost of the 75th truck?
f. Should the 75th truck be produced? Why or why not?
g. What is the allocatively efficient quantity of trucks?
a. 3 cars
b. 1 car
c. This truck should be produced because people value the 25th truck at 3 cars, but it only costs 1 car to make the truck.
d. 1 car
e. 3 cars
f. This truck should not be produced because people value the 75th truck at 1 car, but it costs 3 cars to make the truck.
g. 50 trucks is the allocatively efficient quantity of trucks.
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