Table 10-4

-Refer to Table 10-4. The last unit of output for which private value exceeds social cost is the
A) 2nd unit.
B) 3rd unit.
C) 4th unit.
D) 5th unit.

Question

Table 10-4
 
-Refer to Table 10-4. The last unit of output for which private value exceeds social cost is the
A) 2nd unit. 
B) 3rd unit. 
C) 4th unit. 
D) 5th unit.

Quizplus · Accepted Answer

The last unit of output for which private value exceeds social cost is when the marginal private benefit (MPB) equals the marginal social cost (MSC) line. This occurs at the 4th unit of output. Therefore, the best choice would be to produce only up to the 4th unit in order to maximize social welfare. Any additional units produced after the 4th would result in a negative externality, causing overall welfare to decrease.

Table 10-4 -Refer to Table 10-4. the Last Unit of Output for Unit