A common resource is used efficiently if
A) the output is maximized.
B) marginal social benefit equals marginal social cost.
C) marginal private benefit equals marginal cost.
D) marginal social benefit is maximized.
E) only the excess of the resource is utilized.

Question

Quizplus · Accepted Answer

Efficiency in the use of a common resource is achieved when the marginal social benefit (MSB) is equal to the marginal social cost (MSC). MSB captures the full value of the resource to society (including externalities), while MSC represents the full cost of producing the resource. When MSB = MSC, the resource is being used efficiently, and any further use or reduction in use would lead to a reduction in social welfare.

A Common Resource Is Used Efficiently If