Suppose the Socially-Optimal Quantity of Good X Is 2,500 Units

question 74

Multiple Choice

Suppose the socially-optimal quantity of good x is 2,500 units and the market-equilibrium quantity of good x is 3,000 units. When 2,500 units of good x are produced, the

• A)external cost of good x exceeds the private value of good x.
• B)external cost of good x equals the private value of good x.
• C)social cost of good x exceeds the private value of good x.
• D)social cost of good x equals the private value of good x.

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Definitions:

Undercapitalization

The lack of funds to operate a business normally.