Chapter 14R, Problem 10MCQ

To determine

The curve which is the same as the marginal social cost curve at every level of output in a perfectly competitive market without any external cost.

Answer to Problem 10MCQ

From the available options, the correct option is supplied.

Explanation of Solution

When there is no externality cost in the case of a perfectly competitive market, then the marginal social cost curve lies above the supply curve which is just equivalent to the supply curve at all quantities or levels of output. It means this curve is the same as the supply curve.

Therefore, it cannot be the same with marginal social benefit, external or private benefit, or cost curve, and all options: b, c, d, and a are incorrect.

Here, the correct option is e (supply).

Economics Concept Introduction

Introduction: The benefits which are obtained by the third party who is not buying, selling, or consuming the good are called external benefits. For example, using a vehicle to travel that reduces the congestion on the road because it provides benefit to other drivers so that they can drive quickly and safely.

The marginal social cost is the cost which is incurred by the whole society as well as the individual by producing an extra unit of a product.