Suppose that at current production levels, A Major Corporation's marginal cost is $15, its marginal external cost is $5, and the marginal social benefit of production is $25. In this case, the corporation:

Question

Quizplus · Accepted Answer

The marginal social cost (MSC) is the sum of marginal cost (MC) and marginal external cost (MEC), which equals $20 ($15 + $5). Since the marginal social benefit (MSB) of production is $25, which is higher than the MSC of $20, the corporation is producing less than the efficient amount. Increasing production until MSB equals MSC would achieve efficiency.

Suppose That at Current Production Levels, a Major Corporation's Marginal