Practice Test 1

Based on the market outcome shown in the table, at which quantity is total surplus maximized? The market is currently producing $Q=4$ units. Total surplus is maximized by producing through the last unit where $MB\ge MC$.

Based on the market outcome shown in the table, at which quantity is total surplus maximized (the socially efficient quantity)? The market currently produces $Q=6$ units.

Table (per unit):

• Unit 1: $MB=\$95$, $MC=$15$
• Unit 2: $MB=\$85$, $MC=$25$
• Unit 3: $MB=\$75$, $MC=$35$
• Unit 4: $MB=\$65$, $MC=$45$
• Unit 5: $MB=\$55$, $MC=$55$
• Unit 6: $MB=\$45$, $MC=$65$