Question

1. If residents are permitted unlimited access to the use of the grazing land at a zero price, what is the private marginal cost grazing? Draw the MCp curve in the diagram.

Answer 1

Marginal private cost (MPC) is the change in the producer's total cost brought about by the production of an additional unit of a good or service. It is also known as marginal cost of production. In case of an open land available to all the animal owners for free the private marginal cost (PMC) is smaller than the social marginal cost, and hence leads to an externality.

Here in this case, the residents are permitted unlimited access to the use of the grazing land at a zero price, since the price of grazing to the animal owners is zero so the cost incurring to them is also zero. So the private marginal cost of grazing is 0 (zero), and the MCp curve will be the x-axis of the graph where quantity of grazing will be on x-axis and cost on y-axis.