When less than the efficient amount of a good is produced, how does the marginal benefit of the last unit produced compare to its marginal cost?
What will be an ideal response?
When less than the efficient amount of a good is produced, the marginal benefit of the last unit produced exceeds its marginal cost. The fact that the marginal benefit exceeds the marginal cost indicates that producing additional units of the good will move the amount of production closer to the efficient quantity.
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Assume that Szmul Hertz has an MPC equal to 0.80 . If he normally earns $40,000 per year, but is laid off for part of 2000 and only earns $25,000 . his consumption for 2000 . according to Milton Friedman, will be
a. $16,000 b. $12,000 c. $32,000 d. $40,000 e. $25,000
Disposable personal income:
A. includes personal income taxes. B. excludes personal income taxes. C. excludes transfer payments. D. is income spent for personal items such as homes and cars.