Answer:
c. a quantity equal to the efficient outcome, as market incentives can never be considered too strong.
Explanation:
Incentives to produce may include a higher price or improved demand. The business finds it profitable to increase its output. However, profitability is pegged to a certain level of production. As per the law of diminishing marginal returns, the gains from additional production will rise at an increasing rate in the beginning. At a certain higher level of output, the return will start declining. Eventually, additional production will lead to losses.
Even with a strong incentive to produce, a business should produce up to the optimal point where the marginal returns are positive. At the optimal point, that the resources of the company are being used efficiently. When the marginal return turns negative, then production should stop.
