If marginal benefit exceeds marginal cost, what does this imply about output?

When marginal benefit exceeds marginal cost, it indicates that the additional benefit gained from producing one more unit of a good or service is greater than the additional cost incurred to produce that unit. This situation suggests that there is a potential for increased overall welfare or utility.

In the context of output, if the marginal benefit is greater than the marginal cost, it implies that the level of output is not sufficient to maximize total benefits. Therefore, it is considered inefficiently low because there are still opportunities to produce more units where the additional benefits would outweigh the costs. By increasing production to the point where marginal benefit equals marginal cost, resources would be utilized more efficiently, optimizing output.

In contrast to this understanding, if output were optimized, marginal benefit would equal marginal cost. If the output were inefficiently high, marginal cost would exceed marginal benefit, indicating that resources are being wasted by producing too much. Also, equilibrium typically refers to a point where supply meets demand, which does not directly address the relationship between marginal benefit and marginal cost. Therefore, the scenario where marginal benefit exceeds marginal cost most appropriately indicates that output is inefficiently low.