At the Current Level of Output, the Marginal Social Benefit

question 89

Multiple Choice

At the current level of output, the marginal social benefit of pizza exceeds the marginal social cost of pizza. Compared to the allocatively efficient quantity, we are producing too _______ pizza and too _______ of other goods.

• A) little; much
• B) little; little
• C) much; much
• D) much; little

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Definitions:

Disposable Income

The amount of money a household or individual has available to spend or save after taxes have been deducted.

Government Expenditure

The total amount of money spent by the government on various services and investments.

Discretionary Fiscal Policy

Government policy that involves altering government spending and taxation to influence the economy, based on current economic conditions.

Automatic Stabilizers

Structural features of government spending and taxation that reduce fluctuations in disposable income, and thus consumption, over the business cycle.