Question

Which of the following choices is correct? Multiple Choice

When the marginal cost curve lies above the marginal benefit curve too little of the good has been consumed.

When the marginal cost curve lies above the marginal benefit curve too little of the good has been produced.

When the marginal cost curve lies above the marginal benefit curve less of the good should be produced.

When the marginal cost curve lies above the marginal benefit curve more of the good should be produced.

Answer 1

Option 4

When the marginal cost curve lies above the marginal benefit curve more of the good should be produced.

A marginal cost curve is upward sloping, and a marginal benefit curve is downward sloping so if the MC>MB then the production level is right of the intersection of the two curve which means the production is higher, but consumption is at a point where the two curve intersects (equilibrium), so there are more goods produced than consumed because at this point the marginal benefit is not equal to the marginal costs.