Assume a negative consumption externality. Which of the following is true about the Marginal Private Benefit (MPB), Marginal Private Cost (MPC), and Marginal Social Benefit (MSB) at the socially efficient quantity traded? A) MPC = MPB = MSB B) MSB = MPC > MPB C) MPC = MPB > MSB D) MSB = MPC < MPB
Added by Vickie P.
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This means that the Marginal Social Benefit (MSB) will be lower than the Marginal Private Benefit (MPB) because the MPB only takes into account the benefits to the individual consumer, while the MSB takes into account the costs imposed on others. Show more…
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