For an impure consumption good the maximum output is determined where_____.

Question

Quizplus · Accepted Answer

For an impure consumption good, the maximum output is determined where the marginal cost equals the vertical summation of all individual demand curves. This is because the demand for an impure consumption good is derived from the consumption of the good itself as well as from its external effects, which are captured by the individual demand curves. Therefore, the optimum output level for the firm producing an impure consumption good is determined by equating the marginal cost to the total (vertical summation) of the individual demand curves.

For an Impure Consumption Good the Maximum Output Is Determined