MC 3 MB Computers (millions per year) In the above figure, if 2 million computer
ID: 1135938 • Letter: M
Question
MC 3 MB Computers (millions per year) In the above figure, if 2 million computers are produced per year then the__should be produced to achieve efficient resource use. O marginal benefit of a computer exceeds the marginal O marginal cost of a computer exceeds the marginal O marginal benefit of a computer exceeds the marginal O marginal cost of a computer exceeds the marginal cost of a computer, so more computers benefit of a computer, so fewer computers cost of a computer, so fewer computers benefit of a computer, so more computersExplanation / Answer
Answer: Marginal benefit of a computer exceeds the marginal cost of a computer, so more computers.
Explanation: Marginal benefit is the amount that the consumer is willing to pay in order to have an additional unit of a commodity. A consumer will be willing to pay an increased price until the marginal benefit that he obtains from the additional unit is greater than that of the price of that commodity.
On the other hand marginal cost is the cost involved in producing an extra unit of a commodity. In our case the marginal benefit and marginal cost involved in producing 2million computers is 4 and 2 respectively. Therefore MB>MC.When marginal benefit is greater than marginal cost it means that the benefit derived out of consuming an extra unit of that commodity is greater than the cost involved in producing an that particular unit.It means that there exist under production of the good and therefore the production of computers should be increased in order to bring back the market for computers into equilibrium. People will keep buying computers until it reaches point 3 which is the equilibrium point for computers in the market. This point 3 is known as productive and allocative efficiency, that is where MB=MC.
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