The figure shows the marginal private cost and marginal social cost of producing bananas while using pesticides. The per-tonne price of bananas is constant at $400. Based on the fi... The figure shows the marginal private cost and marginal social cost of producing bananas while using pesticides. The per-tonne price of bananas is constant at $400. Based on the figure, which of the following statements regarding point A is correct?
Understand the Problem
The question describes a scenario involving the production of bananas with pesticides, presenting a graph that shows the marginal private cost, marginal social cost, and the per-tonne price. It asks to choose the correct statement about point A on the graph, relating to economic concepts like Pareto optimality, marginal external cost, and producer profit maximization.
Answer
A is the banana producers' profit-maximising outcome.
A is the banana producers' profit-maximising outcome.
Answer for screen readers
A is the banana producers' profit-maximising outcome.
More Information
Point A represents the quantity of bananas where the marginal private cost equals the market price. This is the point where banana producers maximize their profit.
Tips
Make sure when looking at graphs like these that you understand the difference between marginal private cost, and marginal social cost.
Sources
AI-generated content may contain errors. Please verify critical information
