If the social benefit is greater than the private benefit in a particular market,then the socially optimal equilibrium will be at a quantity:
A) greater than the private level.
B) equal to the private level.
C) less than the private level.
D) greater than or less than the private level, depending on the size of the external costs.

Question

Quizplus · Accepted Answer

If the social benefit is greater than the private benefit, it means that there are external benefits that are not reflected in the private decision-making of individual consumers and producers. Therefore, the socially optimal quantity would be higher than what the market would naturally supply because the external benefits would not be taken into account. As a result, the socially optimal equilibrium would be at a quantity higher than the private level.

If the Social Benefit Is Greater Than the Private Benefit