Final answer:
To find the MPC at a production level of 100 units, subtract the MEC from the MSC. An example is if MSC is $150 and MEC is $50 at q = 100, then MPC is $150 - $50 = $100. This calculation helps account for externalities that affect the true societal cost of production.
Step-by-step explanation:
The question revolves around the concept of externalities in economics, specifically regarding the costs associated with the production level of goods. When an externality is present, the market equilibrium does not reflect the true cost to society. The Marginal Private Cost (MPC) is the cost borne by the firm for each additional unit produced. Conversely, the Marginal External Cost (MEC) is the cost that external parties bear due to the firm's production, and the Marginal Social Cost (MSC) is the sum of MPC and MEC.
To find the MPC at a production level of 100 units, given the MSC and MEC, you would subtract the MEC from the MSC.
For example, if the MSC at q = 100 is $150 and the MEC is $50, then the MPC would be MSC minus MEC, which equals $100.
This aligns with the presented information illustrating that externalities, like environmental damage from fertilizer in farming, can affect the MSC and lead to a divergence from the MPC.
Governments might intervene to correct such market inefficiencies, for instance, by subsidizing the production of more socially beneficial goods like fuel-efficient cars to align private incentives with the social optimum.