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how to calculate the socially efficient number of the good

how to calculate the socially efficient number of the good

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Answer #1

The socially efficient level of output is the quantity of output that maximizes the sum of consumer surplus and producer surplus in the market.This is the most efficient level of output in the market because marginal social benefit of producing and consuming another unit equals the marginal social cost of the good. In the diagram below DD represents the demand curve and SS represents the supply curve and socially efficient level of output corresponds to the level of output at point E where DD and SS curves intersect and sum of consumer and producer surplus is maximized.

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