0
When the marginal social cost is greater than the marginal social benefit what happens?
Wiki User
∙ 11y ago
inefficient overproduction
Wiki User
∙ 11y ago
Add your answer:
Earn +20 pts
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.
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 are the advantages and disadvantages of the government intervention in the free market?
One primary advantage of government intervention is to market failure just like when the marginal social cost is greater than the marginal social benefit or vise versa. One disadvantage is that the market may become dependent on subsidies if they are used to correct failure.
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.
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 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.
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 are the advantages and disadvantages of the government intervention in the free market?
One primary advantage of government intervention is to market failure just like when the marginal social cost is greater than the marginal social benefit or vise versa. One disadvantage is that the market may become dependent on subsidies if they are used to correct failure.
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.
Does widow receive her husband's social security benefit if it is greater than her own?
Yes, a widow receives the social security benefit that is the higher of the two, but she cannot receive both.
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.
Should governments require producers to provide more information about the products to allow consumer to determine their sustainability?
Efficient Answer Only when the marginal social gain from revealing such information is greater than the marginal costs of gathering, writing, and releasing that information. This would represent a potential Pareto improvement.
What is net social benefit?
The net social benefit is the sum of producer and consumer surplus.
Which groups benefit the most from social welfare policies?
Which groups benefit the most from social welfare policies
What is an example of social benefit?
social security, healthcare
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.
What is an social benefit?
social benefits is not good lol x
