What are the socially optimal price and quantity for the graph shown here?

Choose 1 answer:
(A) $Q_{2} ; P_{3}$
(B) $Q_{1} ; P_{1}$
(C) $Q_{2} ; P_{4}$

Question

What are the socially optimal price and quantity for the graph shown here?

Choose 1 answer:
(A) $Q_{2} ; P_{3}$
(B) $Q_{1} ; P_{1}$
(C) $Q_{2} ; P_{4}$

Accepted Answer

∻Solution∻ ‖ a ⋮ Socially Optimal Point: The socially optimal price and quantity occur where the Marginal Cost (MC) curve intersects the Demand (D) curve. This is because at this point, the cost of producing an additional unit equals the value consumers place on that unit, leading to allocative efficiency. ‖ ‖ b ⋮ Identifying Intersection: From the graph, the MC curve intersects the Demand curve at quantity $Q_2$. ‖ ‖ c ⋮ Corresponding Price: The corresponding price at this quantity is $P_3$, as indicated by the dashed line extending from the y-axis to the Demand curve. ‖ ∻Answer∻ ⚹ (A) $Q_{2} ; P_{3}$ ⚹ ∻Key Concept∻ ⚹ Socially Optimal Price and Quantity ⚹ ∻Explanation∻ ⚹ The socially optimal price and quantity are determined where the Marginal Cost (MC) curve intersects the Demand (D) curve, ensuring allocative efficiency. In this case, it is at $Q_2$ and $P_3$. ⚹◊What is the relationship between Marginal Cost (MC) and Marginal Revenue (MR) for the given graph in the context of MicroEconomics?⍭ Generate me a similar question◊

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