### 1. Using marginal analysis to find the optimal quantity of a goodThe following graph shows the marginal benefit (MB) and marginal cost (MC) curves for toy cars in an economy.#### Description of the Graph- **X-axis (Horizontal):** - Label: Quantity (Millions of toy cars per year) - Range: 0 to 40- **Y-axis (Vertical):** - Label: Price (Dollars per toy car) - Range: 0 to 12- **Graph Lines:** - **Marginal Benefit (MB):** - Depicted by a downward sloping blue line. - Starts at $12 per toy car at a quantity of 0 and decreases to $0 per toy car at a quantity of 40 million toy cars per year. - **Marginal Cost (MC):** - Depicted by an upward sloping orange line. - Starts at $0 per toy car at a quantity of 0 and increases to $12 per toy car at a quantity of 40 million toy cars per year.- **Intersection Point:** - The point where the Marginal Benefit curve (blue line) intersects with the Marginal Cost curve (orange line) is highlighted. - Intersection coordinates: Quantity of 20 million toy cars per year and Price of $6 per toy car.The intersection of the Marginal Benefit and Marginal Cost curves indicates the optimal quantity of toy cars in this economy. At this point, the quantity is 20 million toy cars per year, and the price is $6 per toy car. This is the point where the value consumers place on the last toy car (marginal benefit) equals the cost of producing that toy car (marginal cost). Engaging in marginal analysis helps in achieving an efficient allocation of resources. **Resource Allocation and Efficiency in Toy Car Production**---### Analyzing Production Levels and Efficiency**Scenario 1:**If 10 million toy cars are sold, the efficiency status of production needs to be assessed:- **Options:** 1. The production of toy cars is currently at an inefficient level, and to reach efficiency more should be produced. 2. From the data given it is impossible to tell if toy cars are being produced at the efficient level. 3. The production of toy cars is currently at an inefficient level, and to reach efficiency less should be produced. 4. The production of toy cars is currently at the efficient level.**Scenario 2:**If 30 million toy cars are sold, the efficiency status of production needs to be assessed:- **Options:** 1. The production of toy cars is currently at an inefficient level, and to reach efficiency more should be produced. 2. From the data given it is impossible to tell if toy cars are being produced at the efficient level. 3. The production of toy cars is currently at the efficient level. 4. The production of toy cars is currently at an inefficient level, and to reach efficiency less should be produced.### Optimal Production LevelThe optimal allocation of resources would result in the production of a specific number of toy cars. This number needs to be determined to ensure that resources are being used efficiently to maximize production and minimize waste.---**Note:**- For each scenario, select the appropriate option that correctly states the level of production efficiency.- Identifying the optimal number of toy cars helps align production with resource allocation for efficiency.

The social optimum is obtained at the point where the marginal benefits are equal to the marginal…

If 10 million toy cars are sold. which means that: The production of toy cars is currently at an inefficient level, and to reach efficiency more should be produced. From the data given it is impossible to tell if toy cars are being produced at the efficient level. O The production of toy cars is currently at an inefficient level, and to reach efficiency less should be produced. The production of toy cars is currently at the efficient level. IF 30 million toy cars are sold, - vwhich means that: The production of toy cars is currently at an inefficient level, and to reach efficiency more should be produced. O From the data given it is impossible to tell if toy cars are being produced at the efficient level. The production of toy cars is currently at the efficient level. The production of toy cars is currently at an inefficient level, and to reach efficiency less should be produced. The optimal allocation of resources would result in the production of toy cars.

If 10 million toy cars are sold. which means that: The production of toy cars is currently at an inefficient level, and to reach efficiency more should be produced. From the data given it is impossible to tell if toy cars are being produced at the efficient level. O The production of toy cars is currently at an inefficient level, and to reach efficiency less should be produced. The production of toy cars is currently at the efficient level. IF 30 million toy cars are sold, - vwhich means that: The production of toy cars is currently at an inefficient level, and to reach efficiency more should be produced. O From the data given it is impossible to tell if toy cars are being produced at the efficient level. The production of toy cars is currently at the efficient level. The production of toy cars is currently at an inefficient level, and to reach efficiency less should be produced. The optimal allocation of resources would result in the production of toy cars.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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