In the figure below,if the marginal damages line did not originate at 0,
A) it would mean that marginal damages did not exist.
B) there is no way to find MSC.
C) MSC would not originate at the same intercept as MPC.
D) all of these answer options are correct.

Question

In the figure below,if the marginal damages line did not originate at 0, 
A) it would mean that marginal damages did not exist. 
B) there is no way to find MSC. 
C) MSC would not originate at the same intercept as MPC. 
D) all of these answer options are correct.

Quizplus · Accepted Answer

The marginal social cost (MSC) curve is derived by adding the marginal damages to the marginal private cost (MPC) curve. If the marginal damages line did not originate at 0 (i.e. there were some level of damages even when the production level is 0), it would mean that the MSC would not start from the same intercept as MPC. This would make it more difficult to find the optimal level of production that maximizes social welfare (i.e. where MSB=MSC). A and B are not correct because marginal damages always exist and MSC can still be found even if the marginal damages line does not originate at 0.

In the Figure Below,if the Marginal Damages Line Did Not