Question

Note that the lines labeled "Demand" and "Social Value" are parallel. Also, the slopes of the lines on the graph reflect the following facts: (1) Private value and social value decrease by 1.00 with each additional unit of the good that is consumed, and (2) private cost increases by 1.40 with each additional unit of the good that is produced. Thus, when the 74th unit of the good is produced and consumed, social well-being ________?

Answer 1

The social well-being when the 74th unit of a good is produced and consumed depends on the difference between the social value and the private cost at that quantity.

Step-by-step explanation:

The question is asking about social well-being when the 74th unit of a good is produced and consumed. From the information provided, we know that the slopes of the demand and social value curves are parallel and decrease by 1.00 with each additional unit consumed. Additionally, the private cost increases by 1.40 with each additional unit produced. This means that the social value and private value decrease at the same rate, while the private cost increases faster.

When the 74th unit is produced and consumed, the social well-being will be determined by the difference between the social value and the private cost at that quantity. Since the social value and private value decrease by the same rate, the social well-being will be positive as long as the private cost is less than the social value. However, without specific values for the social value and private cost at the 74th unit, we cannot determine the exact social well-being.