A student argues: "Economic surplus is greatest at the level of output where the difference between marginal benefit and marginal cost is largest." This statement is false because

A. the marginal benefit and marginal cost relationship has no relevance to economic surplus.

B. the level of output where the difference between marginal benefit and marginal cost is largest will be below the output level needed to have the maximum economic surplus.

C. the level of output where the difference between marginal benefit and marginal cost is largest will also have the highest producer and consumer surplus.

D. the level of output where the difference between marginal benefit and marginal cost is largest will be above the output level needed to have the maximum economic surplus.

Question

Business

Edward Sullivan

26 August, 09:32

A student argues: "Economic surplus is greatest at the level of output where the difference between marginal benefit and marginal cost is largest." This statement is false because

A. the marginal benefit and marginal cost relationship has no relevance to economic surplus.

B. the level of output where the difference between marginal benefit and marginal cost is largest will be below the output level needed to have the maximum economic surplus.

C. the level of output where the difference between marginal benefit and marginal cost is largest will also have the highest producer and consumer surplus.

D. the level of output where the difference between marginal benefit and marginal cost is largest will be above the output level needed to have the maximum economic surplus.

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Answers (1)

Know the Answer?

Jamir Stafford · Answer 1

The correct answer is B. the level of output where the difference between marginal benefit and marginal cost is largest will be below the output level needed to have the maximum economic surplus.

Explanation:

The term economic surplus is what exceeds the credit after all obligations have been satisfied. It refers to the difference in income over expenses (expenses) in an organization during a given period. Specifically, the surplus of a State is due to the fact that it collects more for taxes, fees, withholdings, etc., than what it spends on providing public services and paying debts; that is to say that the surplus is the opposite of the deficit. Normally, loans to meet some debt or repayment capital do not come into this concept.