For market efficiency,MSC must be equated to MSB.

Question

Quizplus · Accepted Answer

Market efficiency occurs when the marginal social cost (MSC) equals the marginal social benefit (MSB) because producing and consuming that product maximizes the overall social welfare. If MSC is greater than MSB, it implies that the additional cost of producing one more unit of the product outweighs the additional benefit, leading to a decrease in overall social welfare. Similarly, if MSC is less than MSB, it indicates that additional benefits can be achieved by producing one more unit of the product, contributing to an increase in overall social welfare. Hence, for market efficiency, it is essential to equate MSC to MSB.

For Market Efficiency,MSC Must Be Equated to MSB