Question

True / False. The private competitive equilibrium quantity is the allocation that is most efficient in...

True / False. The private competitive equilibrium quantity is the allocation that is most efficient in society if we measure well-being by total surplus
Business   Economics   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

When action of one individual creates loss to others but people who get loss due to that person action, does not receive any compensation from that person, then it is called negative externality. So private market equilibrium will be determined by the intersection of the MPC and MSB. So social optimum will be determined by the intersection of the MSC and MSB.

The private market equilibrium

MPC=MSB

The social optimal equilibrium

MSC=MSB

So social efficient quantity is more compare to the private optimal quantity. Hence in case of social optimal equilibrium, total surplus will be more compare to the private market equilibrium.

Hence it can be said that the private competitive equilibrium quantity is the allocation that is least efficient in society if we measure well-being by total surplus.

Hence the given statement is false.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
9. In order for the equilibrium quantity in a market to be an efficient quantity for...
9. In order for the equilibrium quantity in a market to be an efficient quantity for society, which of the following need to be true? I) Very few firms are producing the good so they can have a strong influence on the market price II) There are no external marginal benefits or external marginal costs associated with the good III) The good is not a public good a) Only III needs to be true b) Only I needs to be...
If cigarette smoking creates a negative consumption externality, then the free market equilibrium quantity will be...
If cigarette smoking creates a negative consumption externality, then the free market equilibrium quantity will be __________ than the socially efficient quantity because ___________. Larger; the free market equilibrium maximizes total surplus Smaller; the harm smokers do to society will reduce demand for cigarettes Larger; cigarette smokers do not internalize the negative effect they have on others Smaller; cigarette smokers do not internalize the negative effect they have on others
PART I- TRUE-FALSE QUESTIONS Following 15 questions are True-False Questions. Write ‘T’ for True and ‘F’...
PART I- TRUE-FALSE QUESTIONS Following 15 questions are True-False Questions. Write ‘T’ for True and ‘F’ for False in the True / False Answer Box. Each question carries ‘2’ mark. Excess capacity characterizes firms in monopolistically competitive markets, even in situations of long-run equilibrium. A competitive market will typically experience entry and exit until accounting profits are zero A monopolist produces an efficient quantity of output but it is still inefficient because it charges a price that exceeds marginal cost...
The private equilibrium quantity is ____ the socially optimal quantity in the case of negative consumption...
The private equilibrium quantity is ____ the socially optimal quantity in the case of negative consumption externalities. From society's viewpoint it would be efficient for ____ of the product to be consumed. equal to; more less than; more greater than; less less than; less greater than; more In the case of negative production externalities, the marginal social cost is ____ the marginal private cost and producers will ____ the product in a free market. greater than; overproduce greater than; underproduce...
1. Determining market and socially efficient quantity For this question, please refer to the following graph....
1. Determining market and socially efficient quantity For this question, please refer to the following graph. It may help to print this out so you can draw on it: https://drive.google.com/file/d/0B-gQ84rVpHz_aEVMOFpvamcxUzg/view?usp=sharing Suppose there is a positive externality of $6 for each unit of widget in the market depicted in the diagram. The free market equilibrium quantity is _________ and the socially efficient quantity (the quantity that society wants to be at) is _____________. 6, 6 3, 6 3, 3 3, 0...
Monopolistic Competition & Oligopoly Please elaborate on answer. TRUE OR FALSE - A monopolistically competitive market...
Monopolistic Competition & Oligopoly Please elaborate on answer. TRUE OR FALSE - A monopolistically competitive market is efficient in its long-run equilibrium because all firms in the market earn a zero economic profit. TURE OR FALSE - Department stores are monopolistically competitive because stores differ in the amount of customer service they provide. Why does entry into markets decrease firm profits? Describe some of the ways in which firms differentiate their products.
Is the following statement true, false or uncertain? Explain your reasoning. Feel free to draw a...
Is the following statement true, false or uncertain? Explain your reasoning. Feel free to draw a diagram with social welfare curves and utilities possibilities frontier. “One conclusion from welfare economics is that society will never prefer an inefficient allocation of resources to an efficient allocation of resources.”
Equilibrium in a perfectly competitive market results in the greatest amount of economic surplus, or total...
Equilibrium in a perfectly competitive market results in the greatest amount of economic surplus, or total benefit to society, from the production of a good. Why, then, did Joseph Schumpeter argue that an economy may benefit more from firms that have market power than from firms that are perfectly competitive?
30. True or false? When a monopolist increases the quantity that it sells, all else equal,...
30. True or false? When a monopolist increases the quantity that it sells, all else equal, total revenue increases, which is called the output effect. 33. Stewart is a lobsterman. His traps are A. Private goods and the lobster he catches are common resources. B. Private goods and the lobster he catches are public goods. C. Rival in consumption and the lobster he catches are not rival in consumption. D. Not Rival in consumption and the lobster he catches are...
1. Answer each of the following statements True/False/Uncertain. Give a full explanation of your answer. A...
1. Answer each of the following statements True/False/Uncertain. Give a full explanation of your answer. A fully labeled graph is a welcome addition to any answer (if applicable), though it is not necessary.                                                                                                 A) In the short-run, average variable cost converges to average total cost as output increases. B) The tragedy of the commons states that individuals will overproduce a common                       resource. C) When evaluating social welfare, a government must take a subjective stance on what...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT