The equilibrium price and quantity in a free market usually reflect private marginal costs and benefits, not social ones.

Question

Quizplus · Accepted Answer

In a free market, producers and consumers make decisions based on their own self-interest, which may not take into account external costs or benefits to society as a whole. As a result, the equilibrium price and quantity may not be optimal from a social welfare perspective.

The Equilibrium Price and Quantity in a Free Market Usually