Chapter 14R, Problem 9MCQ

To determine

The correct option for the marginal external benefit.

Answer to Problem 9MCQ

From the available options, the correct option is the marginal social benefit and the marginal private benefit.

Explanation of Solution

A marginal social benefit is a benefit obtained by the whole society as well as the individual by producing an extra unit of a product. And, the marginal private benefit is the benefit that is obtained by an individual by using an extra unit of the product. Therefore, the marginal external benefit is determined by getting the difference between the marginal social benefit and the marginal private benefit. Total supply and demand are the different aspects that cover the whole demand and supply of goods in the market. To calculate the marginal external benefit, marginal external, as well as social costs, are not used.

Therefore, all options: b, c, a, and e are incorrect.

Here, the correct option is d (marginal social benefit and the marginal private benefit).

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, which reduces the congestion on the road, because it provides benefits to other drivers so that they can drive quickly and safely.