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Figure: Marginal Social Cost and Supply
-(Figure: Marginal Social Cost and Supply) Look at the figure Marginal Social Cost and Supply. The marginal social cost curve lies above the supply curve:
A) because the marginal social benefit is greater for a common resource.
B) and the efficient quantity of this common resource is point E.
C) because the marginal social cost includes the cost of depleting this common resource.
D) because this is a public good.

Question

Use the following to answer question:
Figure: Marginal Social Cost and Supply 
-(Figure: Marginal Social Cost and Supply) Look at the figure Marginal Social Cost and Supply. The marginal social cost curve lies above the supply curve:
A) because the marginal social benefit is greater for a common resource. 
B) and the efficient quantity of this common resource is point E. 
C) because the marginal social cost includes the cost of depleting this common resource. 
D) because this is a public good.

Quizplus · Accepted Answer

The marginal social cost curve lies above the supply curve because it includes the external costs associated with depleting the common resource, which are not accounted for in the supply curve.

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