If the marginal social benefit of a car exceeds the marginal ...

[Mr.Thesaxman]

If the marginal social benefit of a car exceeds the marginal social cost of a car, we are producing too many cars. True or false? Explain.
 
  Indicate whether the statement is true or false

Question 2

A monopolistically competitive firm will end up selling its output for a price such that its
 
  A) price is greater than marginal cost.
  B) price is equal to marginal cost.
  C) price is equal to marginal revenue.
  D) price is equal to average total cost.

[britb2u]

Answer to Question 1

False. If the marginal social benefit of a car exceeds the marginal social cost of a car, we can gain value by producing another car and we are losing value by not producing it. If the marginal social benefit exceeds the marginal social cost, producing another car yields a benefit that exceeds the cost of producing the car. So we are producing too few cars.

Answer to Question 2

A

[Mr.Thesaxman]

TYSM

[bblaney]

Excellent