Question

When a nation is under-allocating resources to the production of a good, then the:_________.

Answer 1

Answer:

c. marginal benefit is less than the marginal cost of the good.

Explanation:

Allocation of resources is important in every nation or society because, human wants are unlimited whereas the resources meant to satisfy these wants are in short supply. Therefore, only the most important needs are satisfied before the less important needs. Marginal benefit is the maximum sum of money that consumers are willing to pay for an additional good or service. Marginal cost is the difference in cost when a new or additional unit of goods is produced.

Nations would allocate less to the production of a good when the maximum price consumers are willing to pay for an added unit of that good becomes less than changes in cost when a unit of that good is produced. Marginal benefit reduces when consumption of the good has increased to a reasonable extent. The consumers then lose interest in paying more for that good.