At the Current Level of Output, the Marginal Social Benefit

question 5

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

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Definitions:

Consumer Surplus

The difference between the total amount that consumers are willing and able to pay for a good or service and the total amount that they actually pay.

Maximum Willingness

The highest amount an individual or entity is ready to pay for a good or service.

Individual Pays

A principle where the cost of a service or good is borne by the individual who consumes or uses it, rather than by society or an organization.

Aggregate Demand Curve

Describes the buying behavior of a group of consumers. We add up all the individual demand curves to get an aggregate demand curve (the relationship between the price and the number of purchases made by a group of consumers).