In the context of socially optimal output, when the marginal social cost exceeds the marginal social benefit, it indicates that the market is producing at a(n) __________ level, leading to potential inefficiencies.

When the marginal social cost exceeds the marginal social benefit, it means that the costs of producing one more unit of a good are greater than the benefits that society receives from it. This situation suggests that the market is producing too much of that good, leading to inefficiencies. For example, consider a factory that pollutes the air while making goods. If the cost of pollution and health problems (marginal social cost) is higher than the value people get from the goods produced (marginal social benefit), then the factory is producing an excess amount, harming society overall. Therefore, to reach a socially optimal output, the production should be reduced until the marginal social cost equals the marginal social benefit.