Question

Are socially efficient level of emission and market efficiency is equal? Explain with diagram​

Answer 1

Answer:

Definition of social efficiency. This is the optimal distribution of resources in society, taking into account all external costs and benefits as well as the internal costs and benefits. Social efficiency occurs at an output where Marginal Social Benefit (MSB) = Marginal Social Cost (MSC).

Social efficiency is closely related to the concept of Pareto efficiency – A point where it is impossible to make anyone better off without making someone worse off

Note:

Social benefit = private benefit + external benefit

Social cost = private cost + external cost

Social efficiency and negative externality

We say social efficiency occurs at an output where Marginal Social Benefit (MSB) = Marginal Social Cost (MSC)

If a good has a negative externality – ignored by individuals, then in a free market, we tend to get over-consumption and social inefficiency.

Explanation:

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Answer 2

Answer:

Definition of social efficiency. This is the optimal distribution of resources in society, taking into account all external costs and benefits as well as the internal costs and benefits. Social efficiency occurs at an output where Marginal Social Benefit (MSB) = Marginal Social Cost (MSC).

Social efficiency is closely related to the concept of Pareto efficiency – A point where it is impossible to make anyone better off without making someone worse off

Note:

Social benefit = private benefit + external benefit

Social cost = private cost + external cost

Social efficiency and negative externality

We say social efficiency occurs at an output where Marginal Social Benefit (MSB) = Marginal Social Cost (MSC)

If a good has a negative externality – ignored by individuals, then in a free market, we tend to get over-consumption and social inefficiency.