Use the following figure. MB and MC represent private, or individual, marginal benefits and costs. MBS represents marginal benefits to society when positive externalities are present, and MCS represents marginal costs to society when negative externalities are present.

-If an individual carries out an activity that has no positive or negative externalities, the individual's net benefit and society's net benefit will:
A) both be maximized at activity level 2.
B) both be maximized at activity level 3.
C) be maximized at activity levels 1 and 4, respectively.
D) be maximized at activity levels 2 and 3, respectively.

Question

Use the following figure. MB and MC represent private, or individual, marginal benefits and costs. MBS represents marginal benefits to society when positive externalities are present, and MCS represents marginal costs to society when negative externalities are present.
 
-If an individual carries out an activity that has no positive or negative externalities, the individual's net benefit and society's net benefit will:
A) both be maximized at activity level 2. 
B) both be maximized at activity level 3. 
C) be maximized at activity levels 1 and 4, respectively. 
D) be maximized at activity levels 2 and 3, respectively.

Quizplus · Accepted Answer

The Answer of Use the following figure. MB and MC represent private, or individual, marginal benefits and costs. MBS represents marginal benefits to society when positive externalities are present, and MCS represents marginal costs to society when negative externalities are present.
 
-If an individual carries out an activity that has no positive or negative externalities, the individual's net benefit and society's net benefit will:
A) both be maximized at activity level 2. 
B) both be maximized at activity level 3. 
C) be maximized at activity levels 1 and 4, respectively. 
D) be maximized at activity levels 2 and 3, respectively.

Use the Following Figure