Using the values for the marginal benefit and the marginal cost ...

[xclash]

Using the values for the marginal benefit and the marginal cost of a bushel of apples given in the table above, what is the allocatively efficient quantity of apples? Suppose 10 million bushels of apples are produced.
 
  Should the quantity be increased or decreased? What if 20 million bushels are produced; should the quantity be increased or decreased?

Question 2

Profits resulting from luck can be distinguished from profits attributable to shrewd predictions by
 
  A) calculating the opportunity cost of earning the profits.
  B) comparing the profits with interest rates.
  C) finding out whether they lead to reduced revenue or increased costs.
  D) no known empirical test.
  E) whether or not they were generally anticipated.

[Tonny]

Answer to Question 1

The allocatively efficient quantity of apples is 15 million bushels because this is the quantity at which the marginal benefit equals the marginal cost. If 10 million bushels of apples are produced, the marginal benefit exceeds the marginal cost, so more apples should be produced. If 20 million bushels of apples are produced, the marginal cost exceeds the marginal benefit and so fewer apples should be produced.

Answer to Question 2

D