Figure 10-6

-Refer to Figure 10-6.Which quantity represents the social optimum for this market?

Question

Figure 10-6
 
-Refer to Figure 10-6.Which quantity represents the social optimum for this market?

Quizplus · Accepted Answer

The social optimum is where marginal social benefit (MSB) equals marginal social cost (MSC). At Q₃, MSB and MSC intersect, indicating that this is the socially optimal quantity. At any other quantity (Q₁, Q₂, or Q₄), either MSB is greater than MSC (resulting in a social welfare loss) or MSC is greater than MSB (resulting in an inefficient allocation of resources).

Figure 10-6 -Refer to Figure 10-6.Which Quantity Represents the Social Optimum for the Social