Answered: Marginal social cost exceeds marginal…

Microeconomics A Contemporary Intro

10th Edition

ISBN:9781285635101

Author:MCEACHERN

Publisher:MCEACHERN

Chapter17: Externalities And The Environment

Section: Chapter Questions

Problem 13PAE

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Question

A perfectly competitive manufacturing industry pollutes public water in its production process, leaving the water unsuitable for use by the surrounding communities. At the market equilibrium output level, which of the following is true?

a. Marginal private cost exceeds marginal social cost.

b. Marginal private cost exceeds marginal private benefit.

c. Marginal social cost exceeds marginal social benefit.

d. The market equilibrium output is equal to the socially efficient output.

e. The market equilibrium output is less than the socially efficient output.

Definition Video Formula Definition Phenomenon in which market supply and demand balance each other. Market equilibrium is the economic state in which the market demand curve intersects the market supply curve, giving us the equilibrium price and equilibrium quantity for which a commodity can be sold and purchased in an economy. When market equilibrium is achieved, it suggests that all resources have been allocated efficiently and that there is just a distribution of income and resources in the economy. Video Formula

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