An efficient equilibrium occurs when:
A) private costs equals private benefits.
B) social costs equals private benefits.
C) private costs equals social benefits.
D) social costs equals social benefits.

Question

Quizplus · Accepted Answer

An efficient equilibrium occurs when social costs equal social benefits. This is because social costs take into account the externalities or spillover effects of an economic activity on society as a whole, while social benefits include both private benefits and any positive externalities. When social costs equal social benefits, the overall welfare of society is maximized.

An Efficient Equilibrium Occurs When