The table below shows the payoff (profit) matrix of Firm A and Firm B indicating the profit outcome that corresponds to each firm's pricing strategy (where $500 and $200 are the pricing strategies of two firms).Table 12.2

-When the social costs of producing or consuming a good exceed the private costs, _____.

Question

The table below shows the payoff (profit) matrix of Firm A and Firm B indicating the profit outcome that corresponds to each firm's pricing strategy (where $500 and $200 are the pricing strategies of two firms).Table 12.2
 
-When the social costs of producing or consuming a good exceed the private costs, _____.

Quizplus · Accepted Answer

When the social costs of producing or consuming a good exceed the private costs, it leads to an inefficiently high quantity of the good being produced and consumed from society's point of view. This is because the market does not account for the external costs imposed on society, leading to overproduction and overconsumption relative to the socially efficient level.

The Table Below Shows the Payoff (Profit) Matrix of Firm