Exhibit 17-7 Exhibit 17-7 represents the consumer market for driving their automobiles.If drivers base their driving decisions on the marginal social cost of driving their cars, what would be the social gain?

Question

Exhibit 17-7  Exhibit 17-7 represents the consumer market for driving their automobiles.If drivers base their driving decisions on the marginal social cost of driving their cars, what would be the social gain?

Quizplus · Accepted Answer

The social gain is equal to the difference between the demand curve (marginal benefit) and the marginal cost curve. At the quantity where these curves intersect, the social gain is maximized. In this case, the intersection point is at a quantity of 50, with a marginal cost of $100 and a marginal benefit of $350. Therefore, the social gain is $250.

Exhibit 17-7 Exhibit 17-7 Represents the Consumer Market for Driving