Figure 10-19
-Refer to Figure 10-19. Each additional unit of the good that is produced yields an external benefit of
A) $15.
B) $23.
C) $36.
D) $89.

Question

Figure 10-19 
-Refer to Figure 10-19. Each additional unit of the good that is produced yields an external benefit of
A) $15. 
B) $23. 
C) $36. 
D) $89.

Quizplus · Accepted Answer

The external benefit per unit of the good that is produced is given by the difference between the social benefit and the private benefit. At an output of 5 units of the good, the social benefit is $60 and the private benefit is $24, so the external benefit is $36 (i.e. $60 - $24). Since each additional unit of the good that is produced yields an external benefit of $36, the best choice would be to increase output until the social cost equals the social benefit, which occurs at an output of 8 units. Therefore, the best choice would be to produce 8 units of the good.

Figure 10-19 -Refer to Figure 10-19. Each Additional Unit of the Good