Socially optimal quantity on a monopoly graph occurs where

• A. The quantity where MC equals MR
• B. The quantity where price equals marginal cost
• C. Where price equals the additional cost of producing those units (MC=0)
• D. The quantity where ATC is minimized

Answer: (C)

The important idea is that society’s most efficient quantity occurs where the value of an additional unit to consumers (marginal benefit) equals the cost of producing that unit (marginal cost). On a standard demand curve, the marginal benefit to society for the next unit is the price consumers are willing to pay, so the efficient point satisfies P = MC.

In a monopoly, the seller chooses output where marginal revenue equals marginal cost, which is to the left of the quantity that would make P = MC. That means the monopoly produces less and charges a higher price than the socially optimal amount, creating deadweight loss. The situation isn’t about MC being zero; the welfare-maximizing condition is where price (the marginal benefit) equals marginal cost.