![]() At the efficient level of output there will usually be some pollution present.6.4 Firm Supply Curves and Market Supply CurvesThe demand curve describes how either one consumer or a group of consumers would change the amount they would purchase if the price were to change. Marginal social cost and marginal social benefit are equal.Ĭ. In order to produce the efficient mount output should be reduced until Since marginal social cost exceeds marginal social benefit, a net social loss is generated.ī. At the point where quantity demanded and quantity supplied are equal, marginal social cost exceeds marginal social benefit and too much of the good is produced. If an external cost exist, a competitive market will produce an inefficient mount of the good. A competitive market will produce at the point where quantity demanded and quantity supplied are equal, or where marginal private benefit equals marginal private cost.Ī. Marginal social benefit is the benefit society receives when an additional unit of a commodity is produced.ġ. If consumers are the only group deriving benefit from a commodity, then the demand curve is the marginal social benefit curve. Willingness to pay reflects the benefit derived from each unit.Ģ. The vertical distance at each quantity shows the mount consumers are willing to pay for that unit. The demand curve represents marginal benefit. Marginal social cost includes both marginal external and marginal private cost.ġ. Marginal social cost is the cost of producing an additional unit of a commodity that is paid by society. The marginal private cost curve is the firm's supply curve.ģ. Marginal private cost is the cost of producing an additional unit of a commodity that is paid by those producing the commodity. Marginal external cost is the cost of producing an additional unit of aĬommodity that is not paid by those producing or consuming the commodity.Ģ. ![]()
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