Question

The additional benefit of producing one more roast beef sandwich at a local deli is $2. The additional cost of producing one more roast beef sandwich is $3. To improve allocative efficiency:

A. producers should produce at least one more roast beef sandwich because MB > MC.
B. producers should produce at least one more roast beef sandwich because MC > MB.
C. producers should not produce one more roast beef sandwich because MB > MC.
D. producers should not produce one more roast beef sandwich because MC > MB.

Answer 1

The correct answer is D) "producers should not produce one more roast beef sandwich because MC > MB"

Step-by-step explanation:

Marginal cost (MC) is the additional cost that you provoke when you add an extra unit of goods or services to your company.

Marginal benefit (MB) is the additional benefit that you receive when you add an extra unit of goods or services to your company.

When:

MC > MB (producers shouldn't produce an additional good or service)

MC < MB (Producers should produce an additional good or service)