Figure 10-19
-Refer to Figure 10-19. Note that the lines labeled "Demand" and "Social Value"are parallel. Also, the slopes of the lines on the graph reflect the following facts: (1) Private value and social value decrease by $1.00 with each additional unit of the good that is consumed, and (2) private cost increases by $1.40 with each additional unit of the good that is produced. Thus, when the 59th unit of the good is produced and consumed, social well-being increases by
A)$28.00.
B)$31.40.
C)$33.60.
D)$36.00.

Question

Figure 10-19 
-Refer to Figure 10-19. Note that the lines labeled "Demand" and "Social Value"are parallel. Also, the slopes of the lines on the graph reflect the following facts: (1) Private value and social value decrease by $1.00 with each additional unit of the good that is consumed, and (2) private cost increases by $1.40 with each additional unit of the good that is produced. Thus, when the 59th unit of the good is produced and consumed, social well-being increases by
A)$28.00. 
B)$31.40. 
C)$33.60. 
D)$36.00.

Quizplus · Accepted Answer

At the 59th unit of the good, the private value is $59, private cost is $82.60, and social value is $59. The difference between social value and private cost is the social well-being, which is $59 - $82.60 = -$23.60.

To calculate the change in social well-being when the 60th unit is produced and consumed, we need to compare the social value of the 60th unit to its private cost. The social value of the 60th unit is $58, because social value decreases by $1 with each additional unit. The private cost of the 60th unit is $84, because private cost increases by $1.40 with each additional unit.

The difference between social value and private cost for the 60th unit is $58 - $84 = -$26. This means that producing and consuming the 60th unit reduces social well-being by $26.

Therefore, the increase in social well-being from the production and consumption of the 59th unit is $23.60, which is closest to $33.60 (answer choice C).

Figure 10-19 -Refer to Figure 10-19. Note That the Lines Labeled "Demand