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Figure: Model of a Market for a Common Resource
-(Figure: Model of a Market for a Common Resource) The figure Model of a Market for a Common Resource shows the intersection of the private supply and demand curves. Without any consideration of the marginal social cost of using a common resource, the quantity of the common resource used at Q will be:
A) larger than is socially desirable.
B) smaller than is socially desirable.
C) efficient.
D) indeterminate without more information.

Question

Use the following to answer question:
Figure: Model of a Market for a Common Resource 
-(Figure: Model of a Market for a Common Resource) The figure Model of a Market for a Common Resource shows the intersection of the private supply and demand curves. Without any consideration of the marginal social cost of using a common resource, the quantity of the common resource used at Q will be:
A) larger than is socially desirable. 
B) smaller than is socially desirable. 
C) efficient. 
D) indeterminate without more information.

Quizplus · Accepted Answer

Without considering the marginal social cost, the quantity used will be larger than socially desirable because individuals do not account for the external costs imposed on others, leading to overuse of the common resource.

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