Question

The additional benefit of producing one more roast beef sandwich at a local deli is $2. The additional cost of producing one more roast beef sandwich is $3. To improve allocative efficiency:
producers should produce at least one more roast beef sandwich because MB > MC.
producers should produce at least one more roast beef sandwich because MC > MB.
producers should not produce one more roast beef sandwich because MB > MC.
producers should not produce one more roast beef sandwich because MC > MB.

Answer 1

First, we take into account the benefit and cost given in the problem. The benefit, which is $2 is a dollar lesser compared to the cost that would be incurred should the business opt to produce one more roast beef. This, of course, tells us that an additional roast beef will just impose an additional $1 cost. Thus, the answer should be the last choice.