(a) Why does an 'external social cost' lead to inefficient overproduction? (b) The table below provides information about the marginal social cost and marginal social benefit of streetlights, which are a public good. Quantity (streetlights per block) Marginal social Marginal social benefit cost (dollars per year) (dollars per year) 1 14 4 2 12 7 3 10 10 4 8 13 6 16 4 19 (i) What is the number of streetlights per block that a private company would provide? Why? (ii) What is the efficient quantity?

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Chapter1: Making Economics Decisions
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part B

3.
(a) Why does an 'external social cost' lead to inefficient overproduction?
(b) The table below provides information about the marginal social cost and marginal
social benefit of streetlights, which are a public good.
Marginal social
benefit
Marginal social
Quantity
(streetlights per
block)
cost
(dollars per year)
(dollars per year)
1
14
4
2
12
7
3
10
10
4
8.
13
6.
16
6
4
19
(i) What is the number of streetlights per block that a private company would
provide? Why?
(ii) What is the efficient quantity?
Transcribed Image Text:3. (a) Why does an 'external social cost' lead to inefficient overproduction? (b) The table below provides information about the marginal social cost and marginal social benefit of streetlights, which are a public good. Marginal social benefit Marginal social Quantity (streetlights per block) cost (dollars per year) (dollars per year) 1 14 4 2 12 7 3 10 10 4 8. 13 6. 16 6 4 19 (i) What is the number of streetlights per block that a private company would provide? Why? (ii) What is the efficient quantity?
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