Question

Assume the market is perfectly competitive. If the market is unregulated, the marginal

A) social cost equals the marginal private benefit.
B) private cost is less than the marginal social benefit.
C) private cost equals the marginal social benefit.
D) social cost equals the marginal private cost.
E) private cost is greater than the marginal social benefit.

Answer 1

In a perfectly competitive market, the marginal social cost equals the marginal private benefit. The social benefits and costs are in balance when the market price is equal to the marginal cost of production.

Step-by-step explanation:

In a perfectly competitive market, if the market is unregulated, the marginal social cost equals the marginal private benefit. This means that the cost to society from producing one more unit of a good is equal to the benefit received by an individual buyer from consuming one more unit of that good. The social benefits and costs are in balance when the market price is equal to the marginal cost of production.