The marginal benefit and marginal private cost curves for aphrodisiacs are given as follows: MB = 200 - Q MPC = Q
In addition to private costs, there is a marginal external cost of $10 per unit of output. What is the efficient level of output?
A) 0
B) 55
C) 95
D) 100
E) none of the above

Question

Quizplus · Accepted Answer

To find the efficient level of output, we need to find the level where marginal private cost (MPC) equals the sum of marginal external cost (MEC) and marginal social cost (MSC), which is equal to marginal benefit (MB).

MEC = $10 per unit 
MSC = MPC + MEC = Q + $10 
MB = 200 - Q

Setting MSC equal to MB:

Q + $10 = 200 - Q

2Q = 190

Q = 95

Therefore, the efficient level of output is 95 units.

The Marginal Benefit and Marginal Private Cost Curves for Aphrodisiacs