Suppose a Policy Change Will Generate $100,000 of Benefits for Low-Income

question 82

Multiple Choice

Suppose a policy change will generate $100,000 of benefits for low-income families and $120,000 of costs for high-income families. This change can best be described as

• A) Pareto efficient.
• B) inefficient.
• C) potentially efficient.
• D) equitable.

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Definitions:

Marginal Cost

The expenditure involved in creating an additional product unit.

Total Variable Cost

The sum of all costs that vary with the level of output, including costs like raw materials and direct labor.

Average Total Cost

The total cost of production (fixed plus variable costs) divided by the quantity of output, representing the cost per unit including all expenses.

Average Variable Cost

The unit variable cost, determined by dividing the total variable expenses by the amount of output generated.