Table 10-1

$$\begin{array} { | c | c | c | c | }
\hline \begin{array} { c }
\text { Quantity } \
\text { (Units) }
\end{array} & \begin{array} { c }
\text { Private Value } \
\text { (Dollars) }
\end{array} & \begin{array} { c }
\text { Private Cost } \
\text { (Dollars) }
\end{array} & \begin{array} { c }
\text { External Cost } \
\text { (Dollars) }
\end{array} \
\hline 1 & 28 & 12 & 4 \
\hline 2 & 26 & 14 & 4 \
\hline 3 & 24 & 16 & 4 \
\hline 4 & 22 & 18 & 4 \
\hline 5 & 20 & 20 & 4 \
\hline 6 & 18 & 22 & 4 \
\hline 7 & 16 & 24 & 4 \
\hline
\end{array}$$
-Refer to Table 10-1. What is the socially optimal quantity of output in this market?
A)5 units
B)4 units
C)6 units
D)7 units

Question

Table 10-1
​
 $$\begin{array} { | c | c | c | c | } 
\hline \begin{array} { c } 
\text { Quantity } \
\text { (Units) }
\end{array} & \begin{array} { c } 
\text { Private Value } \
\text { (Dollars) }
\end{array} & \begin{array} { c } 
\text { Private Cost } \
\text { (Dollars) }
\end{array} & \begin{array} { c } 
\text { External Cost } \
\text { (Dollars) }
\end{array} \
\hline 1 & 28 & 12 & 4 \
\hline 2 & 26 & 14 & 4 \
\hline 3 & 24 & 16 & 4 \
\hline 4 & 22 & 18 & 4 \
\hline 5 & 20 & 20 & 4 \
\hline 6 & 18 & 22 & 4 \
\hline 7 & 16 & 24 & 4 \
\hline
\end{array}$$
-Refer to Table 10-1. What is the socially optimal quantity of output in this market?
A)5 units
B)4 units
C)6 units
D)7 units

Quizplus · Accepted Answer

The socially optimal quantity of output is determined by comparing the private value (benefit) to the social cost (private cost + external cost) for each unit. The social cost for each unit is the sum of the private cost and the external cost. The socially optimal quantity is where the private value equals the social cost. For the 4th unit, the private value is $22, and the social cost is $18 (private cost) + $4 (external cost) = $22, making 4 units the socially optimal quantity.

Table 10-1 ​ -Refer to Table 10-1

Table 10-1
-Refer to Table 10-1