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Relationship between marginal social cost and marginal private cost?
Wiki User
∙ 15y ago
The Marginal Social Cost (MSC) is the Marginal Private Cost (MPC) + the Marginal External Cost (MEC). As an example, a pulp and paper mill might produce paper using a supply curve of MPC = 4Q. The mill pumps its effluent into a river. The effluent then travels downstream and a village that gets its water form the river has to install purification systems. The installation of purification is an external cost borne by the village but attributable to the mill. Now if the mill took into account his external cost and factored it into its cost structure, thereby not allowing raw effluent to get into the river and saving the village the cost of installing purification systems, the company might find that MSC = 6Q (MEC = 2Q). No matter what the Demand function equals, the Equilibrium just went to a higher cost and lower output.
Wiki User
∙ 15y ago
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Is it possible for perfect competitive market to be inefficient?
It is possible for perfectly competitive markets to be inefficient when externalities are present. Externalities arise when an economic activity has an unintended impact on other economic agents and/or the market. This results in there being a socially optimal level of production that does not coincide with the privately determined equilibirum level of production derived from the supply and demand curves (which, respectively, represent the marginal private costs and marginal private benefits to producers and consumers). With respect to the efficiency of markets, positive externalities result in too little of the good in question being produced. In this case, the market equilibrium is lower than desired (the marginal social benefit curve lies above the marginal private benefit [demand] curve). In this case, the efficient market outcome would occur where the marginal social beneift curve interests the marginal private cost (supply) curve. When negative externalities occur, too much of the good in question is being produced. This results in the supply curve, which represents the marginal private costs of production, lying below the marginal social cost curve because the private cost curve fails to take into account the costs of production incurred by all of society. In this case, the efficient market outcome would occur where the marginal social cost curve coincides with the private marginal benefit (demand) curve.
How will equilibirium be determined under discriminating monopoly with two markets?
It will be so because it will not achieve a social equilbrium of marginal benefit (demand) = marginal cost (supply). It will instead set a private profit equilibrium where private benefit (marginal revenue) = marginal cost and thus create a deadweight inefficiency equal to the difference in total social surplus between the regions.
When the marginal social cost is greater than the marginal social benefit what happens?
inefficient overproduction
Social cost benefit analysis?
Summary Social cost/benefit: sum of all private costs/benefit. Social welfare analysis: involves optimising social outcomes based on cost/benefit. Optimal occurs: where marginal social cost (MSC) = marginal social benefit (MSB) Is used for: cost of economic choices, policies, initiatives, etc. Longer Explanation Social cost-benefit analysis is also known as 'welfare analysis' and is very similar to normal firm optimisation models. Essentially, social cost and benefit usually involve a private producer or consumer and a public provider or public demand. In these cases, the private cost/benefit of the private actor differs from the social cost/benefit. A social cost/benefit is simply the sum of all costs and benefits of all private actors. Cost is represented on a cost-quantity axis as a positively-sloped function (linear or higher power) and benefit is a negatively-sloped function. Their optimisation occurs where the derivatives of cost and benefit (marginal social cost; marginal social benefit) are equal. This point is where profit/social welfare is greatest.
How do you determine optimum production?
Three important cases: Total productive surplus is maximised at consumer equilibrium. Total profit is maximised when marginal cost = marginal benefit. Social welfare is maximised where marginal social cost = marginal social benefit.
How is market failure cause environmental degradation?
It is when the private marginal benefits or costs are not equal to social marginal benefits cost. Therefore, result could be likely market failure.
Is it possible for perfect competitive market to be inefficient?
It is possible for perfectly competitive markets to be inefficient when externalities are present. Externalities arise when an economic activity has an unintended impact on other economic agents and/or the market. This results in there being a socially optimal level of production that does not coincide with the privately determined equilibirum level of production derived from the supply and demand curves (which, respectively, represent the marginal private costs and marginal private benefits to producers and consumers). With respect to the efficiency of markets, positive externalities result in too little of the good in question being produced. In this case, the market equilibrium is lower than desired (the marginal social benefit curve lies above the marginal private benefit [demand] curve). In this case, the efficient market outcome would occur where the marginal social beneift curve interests the marginal private cost (supply) curve. When negative externalities occur, too much of the good in question is being produced. This results in the supply curve, which represents the marginal private costs of production, lying below the marginal social cost curve because the private cost curve fails to take into account the costs of production incurred by all of society. In this case, the efficient market outcome would occur where the marginal social cost curve coincides with the private marginal benefit (demand) curve.
How will equilibirium be determined under discriminating monopoly with two markets?
It will be so because it will not achieve a social equilbrium of marginal benefit (demand) = marginal cost (supply). It will instead set a private profit equilibrium where private benefit (marginal revenue) = marginal cost and thus create a deadweight inefficiency equal to the difference in total social surplus between the regions.
When the marginal social cost is greater than the marginal social benefit what happens?
inefficient overproduction
Social cost benefit analysis?
Summary Social cost/benefit: sum of all private costs/benefit. Social welfare analysis: involves optimising social outcomes based on cost/benefit. Optimal occurs: where marginal social cost (MSC) = marginal social benefit (MSB) Is used for: cost of economic choices, policies, initiatives, etc. Longer Explanation Social cost-benefit analysis is also known as 'welfare analysis' and is very similar to normal firm optimisation models. Essentially, social cost and benefit usually involve a private producer or consumer and a public provider or public demand. In these cases, the private cost/benefit of the private actor differs from the social cost/benefit. A social cost/benefit is simply the sum of all costs and benefits of all private actors. Cost is represented on a cost-quantity axis as a positively-sloped function (linear or higher power) and benefit is a negatively-sloped function. Their optimisation occurs where the derivatives of cost and benefit (marginal social cost; marginal social benefit) are equal. This point is where profit/social welfare is greatest.
What is the relationship btw social studies and social science?
Social studies is a broader term that encompasses the study of various social sciences such as sociology, psychology, economics, and political science. Social science is a more specific term referring to the scientific study of human society and social relationships. In essence, social studies can be seen as an interdisciplinary approach that incorporates various social sciences to understand human behavior and society.
What is the Relationship between social structure and individuality?
Social structure refers to the pattern of relationships and interactions that shape society, while individuality refers to unique traits and characteristics of a person. Social structure can influence individuality by setting norms and expectations that shape behavior and identity. At the same time, individuality can also challenge and reshape social structures by introducing new perspectives and ideas.
How do you determine optimum production?
Three important cases: Total productive surplus is maximised at consumer equilibrium. Total profit is maximised when marginal cost = marginal benefit. Social welfare is maximised where marginal social cost = marginal social benefit.
What is the relationship between social work and other social sciences?
Social work is closely related to other social sciences such as psychology, sociology, and anthropology. It draws on theories and methods from these disciplines to understand human behavior, social systems, and societal issues. Social work integrates knowledge from various social sciences to address individual and social problems, promote well-being, and advocate for social justice.
What is the definition of social relation and social relationship?
Social relation refers to the various ways in which individuals interact with each other in society, such as through communication, cooperation, and conflict. Social relationship, on the other hand, refers to the specific connections or bonds that individuals form with each other, such as friendships, family ties, or romantic partnerships. Both concepts are essential for understanding how people relate to one another within a broader social context.
What is the relationship between women movements and social movements?
The women's movement is a social movement.
What is the relationship between all factors?
the relationship between mental illness and biological processes, conditioning, gender and social factors.
