Figure 13.2
Private and Socially Ideal Choices when
Marginal Social Benefit Exceeds Marginal Private Benefit

-According to figure 13.2 if the market is unregulated:

Question

Figure 13.2
Private and Socially Ideal Choices when
Marginal Social Benefit Exceeds Marginal Private Benefit
 
-According to figure 13.2 if the market is unregulated:

Quizplus · Accepted Answer

In an unregulated market, the private decision-maker only considers his marginal private benefit and will consume up to the point where marginal private benefit equals marginal cost. Therefore, the quantity consumed will be QP, which is where marginal private benefit intersects with marginal cost. This is not socially ideal because at QP, marginal social benefit exceeds marginal cost, so there is underproduction of the good from a social standpoint.

Figure 13.2 Private and Socially Ideal Choices When