Asked by Sabrina Mitchell on Jun 22, 2024
Verified
To maximize total surplus with a monopoly firm, a benevolent social planner would choose the level of output where
A) MR = MC.
B) MR intersects the demand curve.
C) MC intersects the demand curve.
D) MR exceeds MC by the greatest amount.
Total Surplus
The sum of consumer surplus and producer surplus in a market, representing the total net benefit to society from the production and consumption of goods.
Benevolent Social Planner
A theoretical construct representing an entity or policymaker that aims to achieve the most efficient and equitable outcomes for society as a whole, often seen in economic models.
- Identify the differences between profit maximization and socially optimal results in environments dominated by monopolies.
Verified Answer
EW
Emma WilkersonJun 25, 2024
Final Answer :
C
Explanation :
To maximize total surplus in a market, a benevolent social planner would aim for the point where marginal cost (MC) intersects the demand curve. This point represents the socially optimal level of output, where the value to consumers (as indicated by the demand curve) equals the cost of producing an additional unit.
Learning Objectives
- Identify the differences between profit maximization and socially optimal results in environments dominated by monopolies.