Figure: Model of a Market for a Common Resource
(Figure: Model of a Market for a Common Resource) The figure Model of a Market for a Common Resource shows the intersection of the private supply and demand curves.Without any consideration of the marginal social cost of using a common resource, the quantity of the common resource used at Q will be:
A)larger than is socially desirable.
B)smaller than is socially desirable.
C)efficient.
D)indeterminate without more information.

Question

Quizplus · Accepted Answer

Without considering the marginal social cost, the market will operate based solely on private costs and benefits, resulting in a quantity that is larger than is socially desirable. This is known as the Tragedy of the Commons, where individuals act in their own self-interest and consume more of the common resource than is sustainable in the long term.