In which of the following is the relationship of price (P) to marginal cost (MC) such that the gains to society as a whole from producing additional marginal units will be greater than the costs?
a. P = MC
b. P > MC
c. P > MC
d. P / MC
b. P > MC
When price is greater than marginal cost (P > MC), the gains to society as a whole from producing
additional marginal units will be greater than the costs.
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According to the text, when management selects a price or quantity, it also selects the other. Explain why this is true
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