(Figure: A Competitive Market in the Presence of Externalities) Use Figure: A Competitive Market in the Presence of Externalities. Given the figure, if there are no external benefits or costs, the output at Q will be:

Question

Quizplus · Accepted Answer

The socially optimal output is where marginal private cost (MPC) intersects with marginal social benefit (MSB) at point Qs, which is the same as the equilibrium output in a market with no externalities. Thus, output at Q is socially optimum in the absence of external benefits or costs.

(Figure: a Competitive Market in the Presence of Externalities) Use