An economy produces protein shakes.
If less than the efficient quantity of protein shakes is produced:
A. it is not possible to be producing at a point on the PPF
B. marginal cost equals marginal benefit
C. marginal benefit exceeds marginal cost
D. marginal cost exceeds marginal benefit

Question

An economy produces protein shakes.
If less than the efficient quantity of protein shakes is produced:
A. it is not possible to be producing at a point on the PPF
B. marginal cost equals marginal benefit
C. marginal benefit exceeds marginal cost
D. marginal cost exceeds marginal benefit

anonymous · Answer

It's not A because the PPF by definition is what the economy is capable of producing. It's not B, because economy will keep producing until MC = MB. Because of diminishing marginal utility, producing an extra unit will decrease the marginal benefit further so it's not D. Therefore it must be C