Practice Test 1

Based on the market outcome shown in the table, is the outcome socially efficient? The market is producing $Q=2$ units. Social efficiency occurs at the quantity where the last unit produced has $MB\ge MC$, and all units with $MB>MC$ are produced.

Based on the market outcome shown in the table, at which quantity is total surplus maximized? The market is currently producing $Q=1$ unit. Total surplus is maximized at the quantity where the last unit produced has $MB\ge MC$.