Reference: Ref 10-4 (Figure: Market for Bathroom Cleaner) The figure shows a market for cans of bathroom cleaner that causes environmental damage, imposing costs on people other than the consumers and producers of the cleaner. What is the efficient quantity in this market?
A) 100
B) 85
C) 15
D) 9

Question

Reference: Ref 10-4 (Figure: Market for Bathroom Cleaner) The figure shows a market for cans of bathroom cleaner that causes environmental damage, imposing costs on people other than the consumers and producers of the cleaner. What is the efficient quantity in this market?
A) 100 
B) 85 
C) 15 
D) 9

Quizplus · Accepted Answer

The efficient quantity is where the marginal social cost (MSC) equals the marginal social benefit (MSB). In this case, at the quantity of 85, the MSC intersects with the MSB. This is because at this quantity, the marginal cost (MC) to society from the environmental damage caused by the cleaner is equal to the marginal benefit (MB) received by consumers and producers from the cleaner. Any quantity higher than 85 would result in a situation where the MSC exceeds MSB, and any quantity lower than 85 would result in a situation where the MSB exceeds MSC. Therefore, the efficient quantity in this market is 85.

Reference: Ref 10-4 (Figure: Market for Bathroom Cleaner) the Figure