For a common resource,efficiency requires that the ________ equals the ________.
A) marginal private benefit; marginal private cost
B) marginal social benefit; marginal private cost
C) marginal social benefit; marginal social cost
D) marginal external benefit marginal external cost
E) marginal social benefit; marginal external cost

Question

Quizplus · Accepted Answer

Efficiency requires that the marginal social benefit (MSB) equals the marginal social cost (MSC), because in a common resource, there are externalities that are not reflected in the private costs or benefits. Only by taking into account the full social costs and benefits, can an efficient allocation be reached. A) is incorrect because it only considers private costs and benefits, while B) and E) considers social benefits but not the cost side. D) is incorrect because it does not involve private costs or benefits.

For a Common Resource,efficiency Requires That the ________ Equals the ________

For a Common Resource,efficiency Requires That the Equals the