Exhibit 17-7
-Exhibit 17-7 represents the consumer market for driving their automobiles.If drivers base their driving decisions on the marginal social cost of driving their cars,what would be the social gain?
A)$150
B)$200
C)$250
D)$300
E)$350

Question

Exhibit 17-7 
-Exhibit 17-7 represents the consumer market for driving their automobiles.If drivers base their driving decisions on the marginal social cost of driving their cars,what would be the social gain?
A)$150 
B)$200 
C)$250 
D)$300 
E)$350

Quizplus · Accepted Answer

To calculate the social gain, we need to find the difference between the marginal social benefit and the marginal social cost. From exhibit 17-7, we can see that the marginal social benefit of driving is constant at $500 per hour. The marginal social cost, on the other hand, varies depending on the number of drivers on the road.

At 5 drivers, the marginal social cost is $250, while at 7 drivers, it is $0. Therefore, the marginal social gain of having an additional driver on the road is $250 ($500 - $250). Any additional drivers after 7 would have a negative social gain, as the marginal social cost becomes higher than the marginal social benefit.

Therefore, the best choice is C) $250.

Exhibit 17-7 -Exhibit 17-7 Represents the Consumer Market for Driving Their Automobiles.If