Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
When marginal social cost equals marginal social benefit
B
When a firm maximizes its profit regardless of social costs
C
When total costs are minimized for the producer
D
When consumer demand is highest regardless of production costs
Understanding the Answer
Let's break down why this is correct
Answer
The socially optimal level of production occurs when the total benefits to society from producing a good or service are equal to the total costs of producing it. This means that the resources used in production are being allocated in the most efficient way, benefiting everyone. For example, if a factory produces shoes, the socially optimal level is reached when the value people place on those shoes matches the cost of making them, including environmental impacts. If the factory produces too many shoes, the extra cost may outweigh the benefits, leading to wasted resources. Therefore, finding this balance is important for ensuring that production is both efficient and beneficial to society as a whole.
Detailed Explanation
The best level of production happens when the extra cost of making one more item is equal to the extra benefit people get from it. Other options are incorrect because Some might think that making the most profit is the goal; It's a common mistake to think that just lowering costs is enough.
Key Concepts
Marginal Analysis
Social Optimality
Resource Allocation
Topic
Marginal Analysis and Social Optimality
Difficulty
easy level question
Cognitive Level
understand
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