When there are no externalities,equilibrium in a market
A)Maximizes social well-being
B)Equates quantity supplied and quantity demanded
C)Equates MSB and MSC
D)Equates MPB and MPC
E)Does all of the above

Question

Quizplus · Accepted Answer

In the absence of externalities, market equilibrium maximizes social well-being because it equates quantity supplied and quantity demanded (B), ensuring that the marginal social benefit (MSB) equals the marginal social cost (MSC) (C), and the marginal private benefit (MPB) equals the marginal private cost (MPC) (D). This alignment of private and social costs and benefits ensures that resources are allocated efficiently, maximizing total surplus in the economy.

When There Are No Externalities,equilibrium in a Market