In the Following Graph, MPC and MSC Represent the Marginal

question 10

Multiple Choice

In the following graph, MPC and MSC represent the marginal private cost and marginal social cost of producing a good respectively. QD represents the demand for the good. Refer to the graph to answer the question. The socially optimum level of output is _____ of the good.

• A) 400 units
• B) 1000 units
• C) 1600 units
• D) 2200 units

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Definitions:

Selling Price

The price at which a product or service is sold to the customer.

Capital Structure

The composition of a company's funding through debt and equity, and how it impacts its risk and value.

Fixed Cost

Business expenses that remain constant regardless of the level of production or sales, such as rent, salaries, and insurance premiums.

Financial Leverage

The use of borrowed funds with a fixed cost in an attempt to increase the returns to shareholders by magnifying investment gains or losses.